The Tax-Free Savings Account (TFSA) has a limit of $7,000 for 2024. But in which stocks should you invest? The overall stock market has been slightly bearish over anticipation of interest rate decisions. A 5% interest rate has dried up money in the market and forced many companies and individuals to divert their funds towards servicing their debt. But those without debt are at a bright spot in terms of investments.
Five Canadian stocks to buy and hold forever in your TFSA
Buying stocks in a market downturn inflates your long-term returns. In 2009, Canada introduced the TFSA to encourage savings habits. Those who invested in strong stocks then are now wealthy and unaffected by the bear market. If you missed the 2009 dip, now is the time to buy the following stocks and hold them for the long term to generate wealth.
Automotive stocks
The stock market has been ruthless on auto stocks. Their post-pandemic revival was short-lived as semiconductor shortages inflated the inventory of all automakers. They couldn’t deliver cars due to a lack of components. When the supply issue eased, demand took a hit as people postponed their car purchases because of high borrowing costs.
These are all temporary setbacks. The long-term demand for electric vehicles (EVs) is intact. Auto components maker Magna International (TSX: MG) reported a strong recovery in sales (up 13%) and profits (up 105%) in 2023 and expects continuous growth in the next two years as global light vehicle production increases. However, the stock did not price in this recovery, and the stock price slipped more than 6.5% in a year. While profits improved, the company continued to grow its dividend during this difficult time, showcasing its commitment to give returns to shareholders.
The automotive sector is cyclical, with phases of down and up cycles. After the 2020–2021 upcycle, there was a downturn. But another upcycle is nearby as EV and autonomous vehicle momentum picks up. You could see the stock surge more than 100% in an upcycle. In the meantime, the stock can give you an over 3% annual dividend, hedging your money against inflation.
BlackBerry (TSX: BB) was also affected by the automotive downturn. It has a QNX royalty revenue backlog of $640 million. This royalty is related to the QNX design wins for cars. When cars are produced and sold, BlackBerry gets a share as royalty. BlackBerry shareholders have been waiting for the moment when the company realizes this backlog revenue. The stock could see a sharp jump at that point. And a turnaround could set the stage for long-term growth.
The dividend balance
Beyond cyclical stocks, you could give your portfolio the stability of dividends with BCE (TSX: BCE). The telco has been in a downtrend since interest rate hikes began, as high-interest expenses ate up the profits. The company posted strong 2023 profits but a weak 2024 outlook as it restructures its business. BCE is closing some of its slow-growth radio stations and investing in high-growth cloud services and digital transformation. Change is always difficult. But BCE has undergone many such changes in the last 50 years without dividend cuts.
Now is an opportune time to buy and hold BCE stock while it trades at its 10-year low. You can lock in an 8%-plus dividend yield, and if you opt for a dividend reinvestment plan, you can even compound your returns in the long term.
Stocks in a long-term growth pattern
You could balance your portfolio with long-term growth stocks Descartes Systems and goeasy. Descartes is a supply chain management solutions provider that helps companies simplify the complex tasks of trade and inventory. The stock has been growing at an average annual rate of over 20% for the last 10 years and can continue this momentum as trade and logistics get more complicated.
goeasy is a non-prime lender that gives short-term loans at a high interest rate. It has been growing steadily, which helped it keep risk in check and increase its stock price gradually over the long term. All these stocks can give decent returns in the long term.
