Investing in shares of fundamentally strong Canadian companies with a proven history of delivering profitable growth can help you create significant wealth in the long term. Moreover, investors can further amplify their returns by leveraging the benefits of a Tax-Free Savings Account (TFSA).
One of the most compelling advantages of a TFSA is that the capital gains, dividends, and interest income are completely tax-free. This tax shield provides a substantial boost to long-term investment returns.
With the TFSA contribution limit for 2024 set at $7,000, here are three Canadian stocks worth buying and holding within a TFSA.
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TFSA stock #1
Investors looking for stocks to buy and hold forever, goeasy (TSX:GSY) could be a compelling option. This financial services company has a stellar history of consistently delivering profitable growth and outperforming the broader markets. goeasy focuses on lending to subprime borrowers, a market that might seem risky but has proven highly beneficial to the company.
For example, goeasy’s revenue has grown at an impressive compound annual growth rate (CAGR) of 20.03%. Even more remarkable is its earnings per share (EPS), which has increased at a CAGR of 32.2% in the same period. Thanks to this solid growth, goeasy stock has surged by over 323% in the last five years, which translates to a CAGR of 33.3%. And it’s not just about capital gains — goeasy has been boosting its dividends consistently for over a decade, enhancing shareholders’ returns.
goeasy’s omnichannel approach and a growing loan portfolio are big factors behind its growth. The company is also expanding geographically and has diversified its funding sources, which adds stability. Higher sales, steady credit performance, and operating efficiency cushion its earnings and support dividend payments. In a nutshell, goeasy is well-positioned to deliver solid financials, which will push its stock price and dividends higher in the coming years.
TFSA stock #2
TFSA investors could consider investing in shares of companies likely to benefit from solid secular tailwinds, as these stocks will likely outperform the broader markets over time. Shopify (TSX:SHOP) is one such stock. This Canadian tech company stands to benefit from the ongoing shift towards multi-channel platforms.
Shopify’s share in the e-commerce sector will likely increase due to its innovative products and solutions, including payment processing, shipping solutions, and global expansion. Further, adding and expanding more sales and marketing channels will likely increase its merchant base and revenues.
Looking ahead, increased adoption of its products, cross-selling opportunities, integration of artificial intelligence (AI) technology in its offerings, and cost-reduction measures bode well for growth. Shopify’s transition towards the asset-light model and improving take rate will enable the company to deliver sustainable earnings and drive its shares higher. Shopify stock has corrected quite a lot from its pandemic peaks. It is trading at the next 12-month enterprise value-to-sales multiple of 9.3, which appears undervalued considering its historical average and high growth prospects.
TFSA stock #3
TFSA investors could add shares of the discount store operator Dollarama (TSX:DOL) to their portfolios. The company’s resilient business model, ability to grow its sales and earnings in all market conditions, and focus on returning cash to its shareholders make it a solid long-term bet. While Dollarama operates a low-risk business model, it has consistently outperformed the TSX with its returns.
For instance, Dollarama stock has grown at a CAGR of 21.8% in the past five years, generating an overall capital gain of about 168%. Moreover, it consistently increased its dividend during the same period.
The retailer’s value pricing strategy and broad product base will support its revenue. Further, its growing store base is a positive and will drive traffic. Higher sales, direct product sourcing, and its focus on improving efficiency will drive its earnings and dividend payments and push its stock higher.
