Compared to the Registered Retirement Savings Plan (RRSP), which is purpose-built for retirement savings, the Tax-Free Savings Account (TFSA) can be quite versatile.
You can develop a multi-purpose portfolio within the TFSA to meet your short-term financial goals, like growing your savings for a down payment or a new car, as well as long-term goals like retirement. Since it produces tax-free income, it’s also the optimal choice for a passive income portfolio.
If you haven’t yet invested the $6,500 contribution allotted for the year, there are three stocks that you should consider looking into.
A railway stock
Even though it’s a reliable dividend payer, Canadian Pacific Kansas City (TSX:CP) is primarily a growth pick. Its 100% growth in the last five years, outstripping the TSX’s 38% growth by a significant margin, is a far more compelling reason to buy this stock than its 0.75% dividend yield.
The railway company has become even more formidable after its acquisition/merger with the US railway company, allowing its clients easy access to key ports from Canada to Mexico.
However, its growth potential dates much farther back. It has more debt compared to the other railway giants in Canada, but it’s quite reasonable considering the massive acquisition it performed and considering its financials; the company is more than capable of staying ahead of its debt commitments.
A financial stock
Goeasy (TSX:GSY) is a powerful growth stock that is currently also a healthy pick for its dividends. The reason is its discounted state. It’s still trading at a 36% discount to its 2021 peak, and this has pushed its yield up to 2.7%. It’s also a generous dividend aristocrat, which is an additional attraction if you are evaluating this stock for its dividends.
The stock is also quite modestly priced right now, and if we combine it with its latest bullish hike that has pushed the value up by 33%, there is a decent probability that the stock might start growing at its pre-pandemic pace.
The pace allowed it to grow over 770% in the last 10 years, and even if, in the future, goeasy performs half as well, it will still be a top-tier growth stock in Canada.
A bank stock
Most Canadian bank stocks in Canada are still discounted, some heavily and some modestly. National Bank of Canada (TSX:NA) is perhaps the least discounted banking institution in the country right now, and considering its current upward trajectory, the discount may shrink to nothing in a matter of days. It has jumped over 7% in just three days.
The yield is still quite attractive at 4.3%, but it may fall below 4% if the stock keeps rising at its current pace.
While not an underdog per se, the National Bank of Canada is definitely a cut below the rest of the big six when it comes to size and reach. That “lightweight” may have been the reason behind its status as the best growth stock in the banking sector (in the last decade, at least). It is just as stable as the other, larger Canadian banks.
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Foolish takeaway
These are the three stocks I’d buy with my $6,500 contributions for the year and add to my TFSA portfolio. All three are buy-and-forget stocks, and two of them are stable blue chips. As long-term holdings, all three can produce amazing results, especially if the market remains bullish. The dividends, especially National Bank’s and Goeasy’s, are an added bonus.
