The TFSA (tax-free savings account) allows you to earn tax-free returns on a specified amount called contribution room. The contribution room for this year is $7,000, while the cumulative room remains at $95,000. Investors, though, should be careful while investing through the TFSA as the decline in stock prices and subsequent selling could reduce their cumulative contribution room. So, investors should have a balanced TFSA with a mix of growth, defensive, and dividend stocks. Here are my four top picks.
Celestica
Celestica (TSX:CLS) is one of the top growth stocks to have in your portfolio, given its solid performance over the last few years and healthy growth prospects. The company is up 99% this year and delivered over 640% returns in the previous three years. Its strong presence in high-growth sectors, such as electronics manufacturing services and artificial intelligence, and solid performance have driven its stock price.
Meanwhile, the uptrend will continue as the growth in artificial intelligence and machine learning usage has raised the demand for high-speed computing switches, thus growing its addressable market. Besides, the company has exposure to diverse sectors, including defence, communication, aerospace, health tech, industrial, and capital equipment, stabilizing its financials. Despite its solid returns, the company trades at an NTM (next 12 months) price-to-earnings multiple of 16.8, making it an excellent buy.
goeasy
goeasy (TSX:GSY) has been one of the top performers over the last five years, expanding its revenue and adjusted EPS at an annualized rate of 20% and 32.2%, respectively. Continuing its uptrend, the subprime lender has grown its revenue and adjusted EPS by 24% in the first quarter of this year amid stable credit and payment performance. Its net charge-off rate was 9.1%, within the company’s guidance of 8.5% to 9.5%. Amid this solid performance, the company has delivered a total shareholder return of 330% over the last five years at an annualized rate of 33.8%.
Meanwhile, goeasy continues expanding its consumer credit products at various interest rates, covering the entire non-prime credit market. Besides, its omnichannel model, which includes 400 retail locations and online lending platforms, could continue to drive its financials. Also, the adoption of its superior underwriting and income verification process and next-generation credit models could lower defaults. Further, goeasy’s management projects its loan portfolio to grow by 50% over the next three years. The loan portfolio expansion could continue to boost its financials and drive its stock price.
Enbridge
Third on my list would be Enbridge (TSX:ENB), which has been paying dividends for 69 years and has also increased the same for 29 consecutive years at a CAGR (compound annual growth rate) of 10%. Its regulated midstream business and inflation-indexed EBITDA (earnings before interest, tax, depreciation, and amortization) generate stable cash flows, thus allowing it to raise dividends consistently.
Meanwhile, Enbridge has expanded its utility business by acquiring the East Ohio Gas Company and the Questar Gas Company. Besides, it is also working on acquiring the Public Service Company of North Carolina, which the company expects to complete this year. These acquisitions would make Enbridge North America’s largest natural gas utility company. Further, it is also expanding its asset base by continuing its $25 billion secured capital program. Along with these growth initiatives, its solid financial position and debt-to-EBITDA multiple of 4.7 make its future dividend payouts safer.
Waste Connections
Waste Connections (TSX:WCN) would be an excellent defensive stock to have in your portfolio, given the essential nature of its business. The waste management company operates primarily in secondary and exclusive markets. So, it faces less competition, thus allowing it to enjoy higher margins. Meanwhile, the company has completed several acquisitions this year, which could contribute US$375 million to its annualized revenue. I expect the company to continue with its acquisitions, as it has claimed this year to be one of the busiest ever.
Moving to organic growth, Waste Connections is building several renewable natural gas and resource recovery facilities, with the company hoping to put three of these facilities into service this year. These expansion initiatives could contribute an incremental adjusted EBITDA of $200 million by 2026. The company has also raised its dividends at an annualized rate of 14% since 2010.
