Investing via the TFSA (Tax-Free Savings Account) enhances overall returns in the long term. The reason is that the capital gains, dividends, and interest earned in a TFSA are not taxed. The TFSA contribution limit is $7,000 for 2024, which investors can leverage to buy shares of fundamentally strong companies to outperform the broader equity markets.
So, if you plan to invest $7,000 in equities, here are the top three Canadian stocks to buy now. These stocks have a history of consistently outperforming the broader markets and the potential to deliver multi-fold returns over the long term.
TFSA stock #1
TFSA investors can consider investing in the shares of the financial services company goeasy (TSX:GSY). It provides lending services to subprime borrowers and has been consistently growing its revenue and earnings at a good pace. Its leadership in subprime lending, a large addressable market, and solid underwriting capabilities support its top and bottom-line growth.
Thanks to its robust financial performance, goeasy stock has generated impressive returns in the past and outperformed the broader equity market by a wide margin. In the last five years, GSY stock generated a remarkable return of more than 338%, boasting a CAGR (compound annual growth rate) of more than 34%. Furthermore, goeasy has increased its dividend for 10 consecutive years, enhancing its shareholders’ return.
Looking ahead, goeasy’s growing consumer loans portfolio, omnichannel offerings, geographic expansion, and diversified funding sources will lead to a double-digit increase in its top line. Moreover, steady credit performance and efficiency improvements will boost its earnings, share price, and future dividend payouts.
TFSA stock #2
Dollarama (TSX:DOL) is another top stock for TFSA investors. Shares of this discount store operator have consistently outperformed the broader markets, reflecting the company’s ability to grow revenue and earnings in all market conditions. For instance, Dollarama stock has grown at a CAGR of over 24% in the past five years, delivering a capital gain of nearly 200%.
Dollarama sells a wide range of products at low and fixed price points. This value pricing strategy drives traffic, enabling it to generate strong sales and earnings. Thanks to its growing earnings base, Dollarama has also enhanced its dividend 13 times since 2011.
In the future, Dollarama’s focus on adding more products, a large and growing store base, a direct sourcing strategy, and a growing footprint in Latin American markets will boost its revenue and earnings growth. Further, its extensive loyal customer base and focus on increasing efficiency will likely support its earnings and share price.
TFSA stock #3
Celestica (TSX:CLS) stock could be a solid addition to your TFSA portfolio. The electronics manufacturing services (EMS) company is poised to benefit from its exposure to high-growth and emerging sectors like electric vehicles (EVs) and artificial intelligence (AI). Moreover, Celestica’s diversified portfolio and revenue sources will likely deliver durable growth in the long term.
It’s worth highlighting that Celestica stock appreciated about 792%, growing at a CAGR of 54.7% in the last five years. Celestica is expected to capitalize on the growing adoption and deployment of AI computing by its hyperscaler customers. Moreover, strong demand across its commercial aerospace submarkets will likely drive its Aerospace and Defense revenues.
While the EV market faces short-term challenges, the structural shift towards EVs and smart energy solutions presents solid growth opportunities over the long term to accelerate Celestica’s growth.
