Canadians can add $7,000 of cash to their Tax-Free Savings Account (TFSA) in 2024. That is a handsome increase from the 2023 contribution limit increase of $6,500. Whenever the Canada Revenue Agency (CRA) gives you a chance to invest tax-free (with very few frills), it is best to take advantage of it.
If you are wondering how to invest that $7,000 contribution room, here are three TSX stocks to think about holding for the long term in a TFSA. You can break your investment into three investments of $2,333 each or you may want to take a larger bet on just one or two of the stocks below.
A steady compounder for a TFSA
FirstService (TSX: FSV) is an intriguing bet for a TFSA. Over the past five years, this stock has doubled in value with a 15% compounded annual growth rate. Over the past eight years (since its spin-out), it has earned shareholders a 580% return.
FirstService has an industry-leading residential property management platform. This is a very resilient business that generates strong cash flow.
Over time, FirstService has deployed that cash into verticals in the residential/commercial construction, repair, and renovation segment. It now has leading brands in restoration, painting, flooring, and roofing.
This stock is almost never cheap. However, it is a well-managed business with a great mix of assets. It has room to grow organically and by acquiring other smaller construction-related players. You may want to wait for a pullback, but it is an excellent stock to hold long-term in a TFSA.
A discount retailer with exceptional returns
Dollarama (TSX: DOL) is another exceptional Canadian stock that would have been a good fit for a TFSA. It has grown to become the dominant discount retailer in Canada. Its stock is up 205% over the past five years and 624% over the past 10 years.
Like Costco, a trip to Dollarama might be to purchase one item, but you come out with a full shopping cart. The perception of value leads purchasers to buy more than they anticipate.
Dollarama tends to have low operating costs and higher-than-average margins for an essential goods provider. It still has room to grow across Canada and through a joint venture in Central/South America.
This stock is extremely pricey. The company has been executing well on its growth strategy. However, it does have quite a bit of leverage. Investors should monitor that management oversees this wisely. I would likewise wait for a broader market pullback before adding this stock to a TFSA.
An exceptional TFSA stock for the years ahead
Speaking about execution, TFI International (TSX: TFII) has done an exceptional job becoming a leading transportation player in Canada and parts of the United States. TFI stock is up 405% over the past five years and 785% over the past 10 years.
TFI has been an excellent consolidator of small- to medium-sized transportation businesses. It can use its scale and operating expertise to help these businesses maximize profits and steadily grow.
TFI has a management team that is highly invested in the stock. The stock trades at a considerable discount to other larger U.S. players. As a result, management is focused on unlocking some of that discount in the coming years.
The transport sector has been in a recession for the past year. Near-term results could be shaky in 2024. However, any pullback would be an excellent time to start a long-term TFSA holding.
