The Tax-Free Savings Account (TFSA) contribution increased by $7,000 in 2024. If you are a new investor, this is an incredible opportunity to invest in stocks completely tax-free. No dividend, interest payment, or capital gain is taxed in the TFSA.
It is an excellent place to hold long-term investments because you don’t want to pay tax on some significantly expanded gains. If you are looking for stocks that could deliver excellent returns over years and decades ahead, here are four to consider buying with $7,000.
A resilient retailer with plenty of growth ahead
Alimentation Couche-Tard (TSX:ATD) stock has it all for a TFSA portfolio. It has growth, trades at an attractive valuation, pays a growing dividend, and has been buying back a lot of stock.
Couche-Tard operates over 16,000 convenience stores and gas stations around the globe. These are not exciting businesses, but they tend to provide essential services (convenience, food, fuel) that have resilient demand.
This company is planning to double earnings before interest, tax, depreciation, and amortization (EBITDA) over the next four to five years. It only trades for 17 times earnings.
Couche-Tard has been aggressively buying back shares (13% over the past several years) and that just means your ownership stake is likely to grow over time.
A financial stock for income and growth
goeasy (TSX:GSY) has similar characteristics. The company has an excellent record of returns (up 259% in five years), strong dividend growth (+25% compounded annual dividend increases), and an attractive valuation as well (under 10 times price to earnings).
goeasy is one of Canada’s largest non-prime lenders. Most of the big banks have exited this segment, leading to goeasy taking market share.
goeasy has built out a retail network across the country and it is growing an online platform as well. The company has expanded its loans to automobiles and recreational vehicles. It is now introducing credit card products.
This stock pays a 2.86% dividend yield, which is a bonus. The company still has a long horizon to grow, and its valuation is attractive for that growth.
A climbing industrial stock
TerraVest Industries (TSX:TVK) is carrying a similar theme to the two stocks above. It’s growing and trading at an attractive valuation. Likewise, smart and efficient capital allocation is the name of the game.
TerraVest does not operate in a flashy industry. It operates mix of industrial businesses with a focus on transport, energy services, and heating. Yet, the company has been able to grow earnings per share by a +20% annual rate over the past five years.
This company has generally grown by making regular acquisitions. It uses its scale and buying power to generate elevated excess cash flows. Despite its strong 64% run-up in 2024, it continues to trade at an attractive valuation.
A residential service stock with a strong record of returns
Another stock to buy for a long-term TFSA hold is FirstService (TSX:FSV). This is the most expensive stock on the list. However, it is a high-quality business that recently pulled back.
FirstService has a residential property management business that is complemented by an array of property renovation and service companies. The residential management business provides a recurring stream of stable income. It has been deploying that income into acquisitions into restoration, home renovation, and commercial roofing businesses.
FirstService has delivered +12% compounded annual returns over the past five years. It’s a well-managed business with a large market to consolidate. It’s a good, stable play for any starter TFSA portfolio.
