3 Growth Stocks for a Solid Tax-Free Retirement Income

These three growth stocks can be good additions to create a tax-free retirement income portfolio in your TFSA.

| More on:
Growth from coins

Image source: Getty Images

Considering the retirement income available through programs like Old Age Security (OAS) and the Canada Pension Plan (CPP), retiring in Canada can be a great thing. However, these pension programs are only designed to fulfill your retirement income requirements partially. Using a sound retirement plan, Canadians can set themselves up for a comfortable life in their golden years.

With the combination of a sound strategy and using your Tax-Free Savings Account (TFSA) contribution room, you can create a sizeable nest egg to fund your retirement. While there are several ways to utilize the TFSA for retirement planning, we will focus on wealth growth through tax-free capital gains.

By allocating money to growth stocks with the potential to deliver multi-bagger returns in the long run, you can raise the funds necessary for a comfortable retirement. Today, we will discuss three growth stocks you can consider for this purpose.

Constellation Software

Constellation Software (TSX:CSU) is a $58.94 billion market capitalization diversified software company. Founded by a former venture capitalist, CSU primarily acquires software companies poised for growth. It then lends its expertise to grow the company, in turn benefitting itself and growing shareholder value. It is a rare example of stable growth in an otherwise volatile sector.

As of this writing, it trades for $2,781.31 per share; analysts believe it is fairly valued. Having delivered over 30% in annualized returns in the last decade, it can be an excellent investment to hold for a retirement nest egg in a TFSA.

goeasy

goeasy (TSX:GSY) is a $1.83 billion market capitalization company headquartered in Mississauga. The alternative financial services company offers financing to borrowers who cannot secure loans through traditional lenders. It also offers unsecured installment loans to consumers. With the economy so uncertain, the company is well-positioned to generate healthy cash flows.

Its business model has worked for years. Since 2014, it has managed to raise its payouts at a compound annual growth rate (CAGR) of around 31%.

It means that besides delivering growth through capital gains, it offers quarterly payouts that can line your account balance with extra cash while keeping outpacing inflation. As of this writing, goeasy stock trades for $110.16 per share and offers payouts at a 3.49% dividend yield.

Dollarama

Dollarama (TSX:DOL) is a stock that might warrant a place in your TFSA portfolio in any market environment. The $27.15 billion market capitalization company is headquartered in Montreal, running the largest discounted retail store chain in Canada. Generating solid cash flows when the economy is booming, its business model also works wonders when consumers want to cut spending.

By offering necessary goods at heavily discounted rates, it offers a cost-effective alternative for consumers who need to meet their needs on a tight budget. As of this writing, Dollarama stock trades for $96.06 per share, up by just over 20% year to date. Outpacing the entire stock market by a margin, Dollarama stock can be an excellent buy-and-hold investment for long-term financial goals.

  • We just revealed five stocks as “best buys” this month … join Stock Advisor Canada to find out if Dollarama Inc. made the list!

Foolish takeaway

Using your TFSA contribution room wisely, you can achieve most of your long-term financial goals. By allocating some of it to long-term growth stocks, you can grow the value of your investments without incurring taxes. By the time you hit retirement, you can reposition your investments in the account to generate tax-free passive income through dividend stocks.

To this end, Constellation Software stock, goeasy stock, and Dollarama stock can be excellent investments.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Adam Othman has no position in any of the stocks mentioned. The Motley Fool recommends Constellation Software. The Motley Fool has a disclosure policy.

More on Dividend Stocks

Technology
Dividend Stocks

10 Years From Now, You’ll Be Glad You Bought These Magnificent TSX Dividend Stocks

The TSX is lucrative to buy these magnificent dividend stocks in bulk and be proud of this decision 10 years…

Read more »

calculate and analyze stock
Dividend Stocks

4 Fabulous Dividend Stocks to Buy in July

Are you looking for long-term income? These four dividend stocks should not only provide you with value in July but…

Read more »

financial freedom sign
Dividend Stocks

5 Steps to Financial Freedom for Canadian Millennials

Follow these steps and nothing can stop Canadian millennials from achieving their early retirement dreams.

Read more »

Investor wonders if it's safe to buy stocks now
Dividend Stocks

We’re Only Getting Older: A Top TSX Stock That Benefits From an Aging Population

For a bet on the aging population, consider this small-cap stock with growth potential.

Read more »

Growing plant shoots on coins
Dividend Stocks

Yield Today, Growth Tomorrow: 3 Stocks to Keep Building Your Wealth

For investors seeking yield today and growth tomorrow, these top Canadian dividend stocks are certainly worth considering right now.

Read more »

Payday ringed on a calendar
Dividend Stocks

This 10.72% Dividend Stock Pays Cash Every Month

This dividend stock remains a consistent, defensive dividend producer that will give up over 10% in income each and every…

Read more »

Blocks conceptualizing Canada's Tax Free Savings Account
Dividend Stocks

TFSA Investors: 2 Standout Domestic Stocks With 7% Yields

These top dividend-growth stocks look oversold.

Read more »

Dividend Stocks

2 Dividend Stocks to Double Up on Right Now

Despite their recent declines, the long-term growth outlook of these two top dividend stocks remains strong, which could help their…

Read more »