The TFSA (Tax-Free Savings Account) is perhaps the best place for Canadian stocks you plan to hold for a lifetime. This Canada Revenue Agency-registered account has the least strings attached.
Inside your TFSA, you pay no tax on the investment income (interest, dividends, or capital gains) you earn. Likewise, you pay no tax when you withdraw your funds. As a result, you can let your investments compound and multiply over the years with zero tax consequences. You don’t want to pay a big tax bill on your big gains.
If you are looking for stocks that you can buy and hold for decades in your TFSA, here are four to look at now.
Constellation: Still a long runway for this top TFSA stock
Even though Constellation Software (TSX:CSU) is up 13% in 2024, it would still be one of my top bets for a long-term hold. Constellation has built an exceptional platform for managing and acquiring small and mid-sized software businesses globally.
The company has just under 1,000 businesses in its fold right now. However, its acquisition market could be 100 times that size. While many investors have worried about Constellation’s growth slowing, it has continued to defy the odds by spinning out entities, investing in cut-out businesses, and increasing its acquisition size.
Speaking of spinouts, Topicus.com and Lumine Group could be great long-term compounders for a TFSA as well.
A software stock for the decades ahead
Another software stock worth a long-term hold in a TFSA is Descartes Systems (TSX:DSG). It operates an essential network that connects global supply chain participants around the world. It also provides software solutions that help streamline the logistics, transport, and supply sectors.
Descartes’s services are very sticky. Once adopted, it is very hard to go back to manual spreadsheet or even paper data entry. Descartes helps its customers save time and money. The company captures high recurring revenues and excellent profit margins.
It has a cash-rich balance sheet. Descartes is very capable of adding more accretive software businesses to its portfolio. It may not be the fastest-growing tech stock, but it is very likely that slow and steady will win the race for Descartes stock.
A real estate stock for a TFSA
Recently, Colliers International Group (TSX:CIGI) stock has been volatile. However, this company has delivered very solid +17% compounded annual returns over the past 10 years.
Colliers is one of the most recognized brands internationally for commercial real estate brokering. This can be a bit of a cyclical industry. Right now, it is in a downdraft.
What many investors don’t recognize is that over 70% of its earnings come from recurring revenues businesses (like property and asset management).
The company has a long-term chief executive officer who is also a major shareholder. If he follows his past playbook of solid organic and acquisition growth, TFSA investors will see further strong returns in the future.
TerraVest: A long-term capital-allocation story
TerraVest Industries (TSX:TVK) has compounded by a +30% annual rate over the past 10 years. Yet, it only has a market cap of $1.2 billion. This suggests it still could have substantial room to rise.
Despite its strong returns to date, it does not operate in a fancy growth industry. It manufactures specialized tanks and trailers for the energy sector. This is not exactly a growth industry, but it has used its scale to deliver higher margins and consolidate the industry.
The company has been very smart at allocating its capital. This quality TFSA stock is likely to continue making very smart investment decisions in the years ahead.
