TFSA: 2 Canadian Stocks to Buy and Hold for Tax-Free Gains

If you’ve got cash to invest in your TFSA, these two top Canadian growth stocks are some of the best businesses to consider buying today.

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The Tax-Free Savings Account (TFSA) is one of the most important, effective, and popular tools Canadian investors have to help grow their hard-earned income. However, even with the popularity of the TFSA, many investors don’t realize how important it is to have a tax-free account to buy and hold top Canadian stocks.

Investing is all about growing your money and doing so as efficiently as possible. Everyone wants to increase their capital as quickly and efficiently as possible. However, you also don’t want to take on too much risk, potentially losing a large chunk of your savings.

That’s why the TFSA is so important. Typically, taxes have some of the biggest impacts on how fast your money grows. So, having an investing account that’s tax-free is essential.

Therefore, because you can buy Canadian stocks and hold them in your TFSA for tax-free gains, you typically want to use the contribution room for some of the fastest-growing stocks (those which would end up requiring you to pay the most taxes on their gains.)

However, as important as buying high-growth stocks is, you also don’t want to invest in stocks that are too risky and potentially lose some of that all-important contribution room in your TFSA.

So, with that in mind, if you’re looking for top Canadian stocks to buy in your TFSA today, here are two of the best.

One of the best Canadian retail stocks expanding rapidly across the U.S.

If you’re looking for high-quality Canadian stocks with significant long-term growth potential to buy and hold in your TFSA, there’s no question that one of the best stocks to consider is Aritzia (TSX:ATZ), the impressive retailer.

Aritzia has been growing rapidly for years, and even with significant macroeconomic headwinds impacting its business recently, a business that sells discretionary goods, Aritzia continues to have plenty of growth potential in the future.

The women’s fashion retailer is consistently introducing new products that resonate with consumers and rapidly expanding its business by opening new boutiques across North America.

And with roughly twice as many boutiques in Canada, despite the U.S. having a population that’s approximately nine times larger, there’s a clear runway for Aritzia to grow its operations substantially as it opens more boutiques south of the border.

In addition to its boutiques, Aritzia’s always had a top-notch e-commerce platform. It’s what helped the company to continue growing even through the pandemic and the lockdowns that came with it. Furthermore, it also helps Aritzia identify where most of its sales and demand come from, which helps the company decide where to open its next boutiques.

In fact, in Aritzia’s last five full years of operations, its sales have grown at a compound annual growth rate (CAGR) of 21.7% from just $875 million to over $2.3 billion. Plus, even in this uncertain environment, analysts expect another 10.3% growth in its sales this year.

Even more importantly, though, analysts expect its normalized earnings per share (EPS) to recover this year after its margins were largely impacted over the last few quarters due to the economic environment.

Therefore, while one of the top Canadian growth stocks trades at just 20.5 times its forward earnings, it’s undoubtedly one of the best stocks to buy in your TFSA today.

A top Canadian stock buy in your TFSA and hold for years

In addition to Aritzia, Dollarama (TSX:DOL) is another unbelievable Canadian growth stock to buy and hold in your TFSA.

Not only is Dollarama a highly popular business with consumers (demand for discounted goods is almost always steady or growing), but it’s also a company that has consistently executed its goals to perfection, which has led to years of impressive growth.

The stock might seem expensive, especially compared to Aritzia, a company facing substantial headwinds in the current environment. However, because of its reliability and rapid growth potential, Dollarama is a stock that certainly deserves a growth premium.

Therefore, whether you want to buy the Canadian stock now before it gets more expensive or wait for a pullback to get it at a discount, once you do decide to buy and hold Dollarama for the long haul, it’s a stock you’ll certainly want to own in your 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 Daniel Da Costa has positions in Aritzia. The Motley Fool has positions in and recommends Aritzia. The Motley Fool has a disclosure policy.

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