TFSA: 4 Canadian Stocks to Buy and Hold Forever

Canadian stocks like Enbridge and Fortis are ideal candidates to buy for tax-free TFSA dividend income and capital gains.

IMAGE OF A NOTEBOOK WITH TFSA WRITTEN ON IT

Image source: Getty Images

The tax-free savings account, or TFSA, is a gem of a savings vehicle that Canadian investors should maximize. The cumulative TFSA contribution limit currently stands at $95,000, so this is a substantial amount of tax savings to be had. It makes sense to utilize this to the best of our ability.

Here are four ideal Canadian stocks to buy and hold in your TFSA.

CGI Group

CGI Inc. (TSX:GIB.A) has been in the digitization business for a very long time. In fact, it has a long and strong history of success, starting way back in the late 1970s. CGI is a $28 billion IT services giant that has a globally diversified business, with clients from many different business verticals.

Today, this Canadian stock doesn’t pay any dividends, as the company continues to consolidate this highly fragmented business. This means that the company has been very active in acquiring. Acquisitions have resulted in strong growth for CGI. Accordingly, the stock has increased 270% in the last 10 years and 36% in the last five. In a TFSA, these capital gains are sheltered from tax, thereby avoiding a potentially massive tax bill.

Looking ahead, CGI continues to see strong acquisition opportunities, as the pipeline remains robust. In its latest quarter, CGI reported double-digit revenue growth and strong margins. Revenue in the quarter increased 11.4%, as Western Europe and the United Kingdom/Australia posted growth rates of 28% and 11%, respectively. Also, CGI’s earnings before interest and taxes (EBIT) of $564 million was 13% higher than last year and represented a margin of 15%.

Enbridge

I’m also liking Enbridge Inc. (TSX:ENB) as a stock to buy for your TFSA for few different reasons.

Firstly, the stock is currently yielding a very generous 7.4%. This dividend is easily covered by the company’s cash flow from operations. Also, the dividend is supported by a very predictable, stable revenue base.

Secondly, the company transports a significant portion of North America’s natural gas. While there is a push to move away from fossil fuels, the reality is that demand for natural gas will likely remain high for many years to come. Enbridge’s results are a reflection of this.

Fortis

As one of the premier North American utilities, Fortis Inc. (TSX:FTS) also has a long history of success. This is, in fact, reflected in Fortis stock’s dividend history – 50 years of dividend increases. It’s a dividend that’s backed by a highly defensive business and regulated revenue profile. Today, Fortis stock is yielding a very generous 4.3%.

This stock is ideal for TFSA investors because of the growing dividend showing no signs of stopping. Looking ahead, Fortis’ dividend is expected to grow between 4% and 6% annually through to 2028.

Northwest Healthcare REIT

With a yield of over 7%, Northwest Healthcare Properties REIT (TSX:NWH.UN) is looking good for TFSA investors.

Despite its dividend cut last year, Northwest Healthcare remains well-positioned as an owner of some of the most desirable and defensive medical properties.

These properties are characterized by long-term tenancy, with a weighted average lease expiry of 13.2 years, and 83% of these leases are subject to inflation indexation. Also, they’re often supported by government funding. It is this stability that gives me comfort in Northwest.

The REIT’s latest results were characterized by strong operating income growth and a strengthening balance sheet. Net operating income in the quarter ended March 31, 2024 increased 6% to $133.5 million, and Northwest posted portfolio occupancy of 96.5%.

The bottom line

The goal of maximizing our contributions to get as close to the TFSA contribution limit as possible is the right place to start. To help decide what to do with these contributions, I’ve talked about four Canadian stocks that are good candidates for inclusion in any TFSA.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Karen Thomas has a position in CGI, Enbridge, and NorthWest Healthcare Properties Real Estate Investment Trust. The Motley Fool recommends CGI, Enbridge, Fortis, and NorthWest Healthcare Properties Real Estate Investment Trust. The Motley Fool has a disclosure policy.

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