Retirement planning involves setting your retirement goals and taking appropriate actions to achieve those goals. Investors should plan and start investing early in their careers to harness the power of compounding. Also, it allows sufficient time to overcome any unprecedented challenges.
Meanwhile, TFSA (Tax-Free Savings Account) would be an excellent vehicle for retirees to plan for retirement, as it allows investors to earn tax-free returns upon a specified investment.
Amid signs of inflation cooling down, the Canadian equity markets have witnessed healthy buying over the last few days. However, food prices are still rising and are up 20% over the previous two years. So, we are not out of the woods. In this uncertain environment, retirees can add the following two solid Canadian stocks to their TFSA to earn tax-free superior returns in the long run.
Dollarama
Dollarama (TSX:DOL) is one of the top Canadian stocks to have in your TFSA due to its solid underlying business, impressive track record, and high-growth prospects. The company operates 1,507 stores across Canada, with 85% of Canadian households within 10 kilometres of its store. It focuses on direct sourcing, which allows it to eliminate intermediatory expenses and increase bargaining power. So, the company can offer its products at attractive prices to its customers, thus driving its same-store sales growth.
In the April-ending quarter, the company reported an impressive same-store sales growth of 17.1, with a 15.5% increase in transactions and a 1.4% increase in average transaction value. Supported by strong same-store sales growth and net addition of 76 new stores over the last 12 months, the company’s top line grew by 20.7%. Meanwhile, I expect the uptrend in the company’s financials to continue, as it plans to add 60-70 stores annually to increase its store count to 2,000 by 2031.
The company owns around 50.1% stake in Dollarcity. It plans to expand its footprint from the current 448 stores to 850 by 2029, which could increase its contribution towards Dollarama’s net earnings. Dollarama has also rewarded its shareholders with share repurchases and dividends. Since 2012, it has paid around $6.2 billion. Considering all these factors, I believe Dollarama would be an excellent long-term buy.
Nuvei
Given its solid performance and high long-term growth potential, I am selecting Nuvei (TSX:NVEI) as my second pick. The company offers a modular, flexible, and scalable technology that allows its clients to accept next-gen payments, thus accelerating their businesses. It operates in over 200 markets, supporting 150 currencies and 615 alternative payment methods.
With the growth in e-commerce, the adoption of digital payments is growing. Meanwhile, many research firms are projecting that the global digital payments market will grow in double digits annually through this decade, thus creating a multi-year growth potential for Nuvei.
Meanwhile, the company has increased its capital investments in developing new technology and innovative products to expand its customer base and drive its clients’ businesses. The company services licensed iGaming and online betting operators in the United States. With the increased legalization, the market is expanding, thus benefiting Nuvei. Despite its multiple growth drivers, the company trades at an NTM (next 12-month) price-to-earnings multiple of 15, making it an attractive buy at these levels.
Investor takeaway
Given their solid underlying businesses and long-term growth prospects, these two TSX stocks can deliver superior returns in the long term. So, retirees can add these two stocks to their TFSA to earn multi-fold returns in the long run, thus allowing them to retire confidently.
