Any increase in the size of the contribution limit is good news for Tax-Free Savings Account (TFSA) investors. Many have $1 million targets, and those who have maximized but stayed within the limits since 2009 could be approaching the goal. Meanwhile, stock selection is the key to a fruitful journey.
If you need to fuel tax-free money growth in your TFSA, consider buying the Canadian Imperial Bank of Commerce (TSX:CM), Canadian Natural Resources (TSX:CNQ), or Rogers Communications (TSX:RCI.B). All three outperformed the giants in their respective sectors in 2023. With inflation cooling and recession risks dissipating, the stocks should soar higher and deliver fatter gains in 2024 and beyond.
Big winner
High-interest rates were massive headwinds for banks last year, which is ironic. CIBC rebounded strongly in the later months and eventually returned more than 22%, the best performance among Big Banks. In fiscal 2023, net income declined 19% to $5 billion versus fiscal 2022, while provision for credit losses rose 90% year over year to $2 billion.
Nonetheless, its President and CEO, Victor Dodig, said the $59.4 billion bank delivered solid financial performance amid a fluid economic environment. He adds, “We enter the new fiscal year with a robust balance sheet and strong credit quality.”
CIBC boasts a mean 155-year dividend track record. At its current share price of $63.77, you can feast on the 5.65% dividend. A $7,000 investment will generate $98.88 in tax-free quarterly income.
Significant earnings growth
TSX’s energy sector delivered a below-par performance in 2023, but not Canadian Natural Resources. At $87.61 per share, the trailing one-year price return is 22.2%. While the 4.57% yield is lower than the 5.3% industry average, the payouts have been stable in the last 10 years.
The $95.3 billion crude oil and natural gas producer (largest and second-largest in Canada) has grown earnings by 29.9% annually in the last five years. Canadian Natural’s competitive advantage is its large, high-quality, long-life, low-decline asset base.
For 2024, management expects the $5.4 billion capital budget and diversified asset portfolio to drive material free cash flow (FCF) and maximize shareholder returns. Its CFO, Mark Stainthorpe, said FCF distribution to shareholders will increase to 100% in Q1 2024 when net debt reaches $10 billion. Market analysts’ high price target for CNQ in one year is $105 (+20% upside).
So far, so good
Rogers Communications has done well after acquiring Shaw Communications. The combination gave the $32.6 billion communications and media company the scale, assets, and capabilities to compete with industry titans. In the first three quarters of 2023, total revenue and adjusted net income climbed 24% and 30% year over year to $14 billion and $1.8 billion, respectively.
Exciting things are coming in 2024 for Rogers. Its media business got a boost with the new multi-year agreement with the Professional Women’s Hockey League. The company also intends to introduce satellite-to-mobile phone technology this year. At $62 per share, the thriving telco stock pays a decent 3.23% dividend.
Market analysts recommend a buy rating; their 12-month average price target is $75.25 (+21%).
Wealth-builder
A $1 million TFSA balance seems impossible, if not ridiculous. However, determined investors with patience, time, and financial capacity to maximize yearly contributions will achieve the objective. Remember, the primary purpose of the TFSA is to help Canadians build wealth.
