The TFSA (Tax-Free Savings Account) is a registered Canadian account that can be used to hold a portfolio of growth, value, and dividend stocks. In 2024, the TFSA contribution limit has increased to $7,000, up from $6,500 in 2023 and $6,000 in 2022.
Here are three quality TSX stocks you can buy in the TFSA right now, allowing you to derive outsized gains in the upcoming decade.
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Shopify stock
An e-commerce giant, Shopify (TSX:SHOP) has already returned 117% to shareholders year to date, valuing the company at $131 billion by market cap. Despite a slowing macro environment in 2023, Shopify is on track to increase sales by $7.5 billion in 2022 to $11.1 billion in 2024.
Due to an asset-light business model, tech stocks, including Shopify, benefit from high operating leverage, which means profit margins grow at a faster pace than revenue.
According to Bay Street, Shopify’s adjusted earnings are forecast to expand from $0.05 per share in 2022 to $1.37 per share in 2024. The company’s focus on cost efficiencies and exit from unprofitable businesses will help it deliver consistent net income in 2023 and beyond.
Shopify has onboarded more than two million merchants on its platform due to a widening portfolio of products and services. Additionally, Shopify benefits from a wide competitive moat as it is the second largest e-commerce platform in the U.S. after Amazon.
Despite its lofty valuation, SHOP stock is positioned to derive market-beating returns for long-term investors.
Brookfield Asset Management stock
One of the largest asset managers in the world, Brookfield Asset Management (TSX:BAM) is valued at $20.6 billion by market cap. With investments in infrastructure, clean energy, private equity, credit, and real estate, BAM is a well-diversified alternate asset manager with US$865 billion in assets under management.
It ended the third quarter (Q3) with US$440 billion in fee-bearing capital, allowing the company to pay shareholders an annual dividend of $1.74 per share, indicating a yield of 3.3%. BAM estimates the market for alternative investments to grow to US$23.2 billion in 2026, up from US$4 billion in 2010. Further, alternatives might account for 60% of institutional allocation by 2030, up from just 5% in 2000 and 30% in 2021.
These secular tailwinds should enable BAM to grow its fee-bearing capital to more than US$1 billion by 2028, supporting dividend hikes and earnings growth.
Barrick Gold stock
The final TSX stock on my list is Barrick Gold (TSX:ABX), which might gain significant pace in 2024. Generally, gold prices are inversely related to interest rates. With multiple rate cuts scheduled in 2024, gold prices are poised to touch all-time highs in the next 12 months. Further, the yellow metal thrives amid economic and geopolitical turmoil.
There is a chance that several economies might enter a recession in 2024, while geopolitical tensions might also remain elevated in the near term, acting as key drivers for gold.
Mining stocks such as Barrick Gold can expand production to benefit from higher commodity prices and enjoy robust earnings. A debt-free balance sheet also allows Barrick Gold to pay shareholders a dividend yield of 2.25%. Priced at 17.4 times forward earnings, ABX stock trades at a discount of 20% to consensus price target estimates.
