A new year means another contribution that investors can make to their TFSAs (Tax-Free Savings Accounts). Indeed, the limit for 2024 has been hiked to $7,000, up from $6,500 from last year. Understandably, $7,000 is a considerable sum for many eligible Canadians to make this January. In any case, those with an extra $7,000 to invest in a TFSA may wish to look at the numerous opportunities to be had on the TSX today.
Indeed, the TSX Index is abundant with value stocks trading at historically attractive multiples, and dividend yields still seem slightly on the higher end. Of course, your mileage (or should I say, kilometres) will vary depending on where you look. Regardless, I believe that Canadian investors have a lot of reasons to stick with Canadian stocks this time of year, especially as the loonie hovers below US$0.75.
In this piece, we’ll check out three stocks I’d be more than willing to buy and hold for several years. The following stocks look cheap, yield-rich, and quite timely as we head into the latter half of January 2024.
Bank of Montreal
First up to the plate, we have Bank of Montreal (TSX: BMO), a Canadian bank with a robust domestic and U.S. business. The stock yields a terrific 4.65% at writing, even after rallying close to 15% in the past three months. Though BMO stock could easily yield north of 5% in the event of a broader banking pullback, I’d not be afraid to start a relatively small starter position right now at $127 and change per share.
It’s not just the U.S. banking business that has me intrigued by BMO over some of its peers. The ETF (exchange-traded fund) business has come quite a long way, with a wide range of ETF offerings that start with the letter “Z.” You may own some BMO ETFs without even realizing it.
In any case, I remain bullish on BMO’s long-term prospects from here, regardless of what Mr. Market has in store for Canada’s top banks in the coming quarters.
CN Rail
Up next, we have railway kingpin CN Rail (TSX: CNR), which is pretty much flat over the past year, with around 2% in gains. Undoubtedly, CNR stock has been quite a choppy ride in 2023, with shares correcting over 14% before bouncing back with fury to close out a rather eventful albeit somewhat sluggish year.
Going into 2024, I like the risk/reward to be had, with shares going for 22.6 times trailing price to earnings. The dividend currently yields 1.91%. Most importantly, though, it’s poised to grow at an above-average rate every single year. It’s this degree of certainty that should have the love of truly long-term value investors.
CP Rail
CP Kansas City (TSX: CP) is also a great Canadian railway to stash in your TFSA for the long haul. It can be tough to choose between CN and CP. Though both rails have different growth trajectories, I believe that it cannot hurt to own both, especially at today’s reasonable valuation multiples.
At $105 and change per share, the stock goes for a slight premium to CN at 23.6 times trailing price to earnings. That’s a fair multiple for a pretty attractive railway that sports a wide moat. With a 0.72% yield, shares ought to be considered as a part of a diversified TFSA aimed at building wealth long term.
