A TFSA, or Tax-Free Savings Account, is an excellent tool for achieving long-term financial goals like retirement. As capital gains and dividend income generated in a TFSA are free of tax, it significantly enhances the real return, especially over time. Thus, investors planning to save for retirement must leverage their TFSA contribution limit ($6,500 for 2023) to invest in the hottest Canadian stocks to create wealth.
Against this background, here are top Canadian stocks with the potential to deliver outsized, tax-free capital gains.
goeasy
TFSA investors planning to save for retirement must consider adding shares of goeasy (TSX:GSY) to their portfolios. The company offers loans to subprime borrowers and has delivered explosive returns over the past decade. While its stock has witnessed a pullback in the recent past due to macro concerns, its business remains resilient and continues to deliver solid top- and bottom-line growth.
goeasy’s top line could continue to increase at a double-digit rate in the coming years. Its comprehensive product range, a large subprime lending market, and higher loan originations will drive its revenue and support earnings growth. Also, its high-quality loan originations, stable credit performance, and operating leverage from higher sales will drive its earnings and stock price.
Besides capital gains, this Dividend Aristocrat is likely to boost its shareholders’ returns through higher dividend payments. Overall, its fast-growing business, low valuation, and decent yield make it a top stock to add to your TFSA portfolio for creating wealth.
WELL Health
WELL Health (TSX:WELL) is another high-growth company that should be on your radar for creating wealth in the long term. Shares of this digital healthcare company took a hit from general market selling in the tech stocks. Further, concerns around its growth in the post-pandemic world remained a drag. Nonetheless, WELL Health stock has marked a recovery in 2023, while its business continues to grow rapidly, led by higher omnichannel patient visits.
WELL Health will likely benefit from solid organic sales growth, reflecting a continued increase in its omnichannel patient visits. Furthermore, the momentum in its high-margin virtual services business augurs well for profitable growth in the coming years. Also, its accretive acquisitions and investments in AI (artificial intelligence) bode well for future growth.
Overall, its solid underlying sales, growing scale, ability to sustain profitability, and low valuation make it a compelling investment near the current levels.
Shopify
Shopify (TSX:SHOP) is a must-have stock to generate solid capital gains in the long term. The company is poised to benefit from secular sector trends, including increasing e-commerce penetration in the overall U.S. retail and an ongoing shift in selling models towards omnichannel commerce platforms.
While its stock bounced back in 2023, it continues to trade at a discounted valuation compared to its historical average. While Shopify stock is trading cheap, it continues to benefit from a growing merchant base, the addition of new marketing and selling platforms, innovative product launches like Payments and Capital, and an improving attach rate.
Looking ahead, the ongoing digital shift, a growing number of merchants buying Shopify’s multiple solutions, and an asset-light model position it well to deliver sustainable earnings, which will lift its share price higher.
