Are you looking for Canadian assets to buy and hold forever in your Tax-Free Savings Account (TFSA)?
If so, you have options.
Investing in index funds and rolling over Guaranteed Investment Certificates (GICs) are strategies worth considering. Index funds are diversified enough that you can simply buy the same ones progressively over time and expect a reasonably good result. “Rolling over” (re-investing) GICs is a similarly low-risk strategy, as GICs are insured by the government (though this is technically a re-investment strategy not a long term hold).
If you want individual stocks that you can buy and hold forever, you need to do more research. Such stocks are rare, but they can be found. In this article, I will explore three TSX stocks that may be worthy of a life-long holding period.
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Alimentation Couche-Tard
Alimentation Couche-Tard (TSX:ATD) is a Canadian gas station company that operates the well-known Circle K gas station chain. It bought the originally U.S.-based chain from ConocoPhillips in the early 2000s. Since then, the company has expanded Circle K across Canada. Alimentation Couche-Tard also operates the Couche-Tard chain in Quebec and has a number of Circle K locations in Europe.
What makes ATD such a good long-term play?
First, its management has a good track record, having re-invested earnings to grow the business instead of paying out excessive dividends.
Second, it’s involved in fuel sales, so it profits off continued strength in the price of oil (Warren Buffett among other top investors are betting on this trend).
Third and finally, the stock is not overly expensive, trading at 21 times earnings. So, the current price might be an acceptable entry price.
CN Railway
Canadian National Railway (TSX:CNR) is one of Canada’s most economically important companies. It ships $250 billion worth of goods each year across Canada and the United States, making it a vital component of the North American economy. The commodities it ships — oil, grain and timber — are among the most important that exist. This ensures that CN Railway will enjoy steady recurring business well into the future.
Railroads, in general, enjoy a major advantage: they are the cheapest way to ship bulk goods by land. This gives them a natural advantage over trucking companies and other shipping companies.
One of CN Railway’s specific advantages is that it has only one major competitor: Canadian Pacific Kansas City Railway. This lack of competition gives CNR a lot of pricing power, and that fact can be seen in the company’s margins. With a 32% net profit margin and a 27% return on equity, CNR is very profitable.
Fortis
Fortis (TSX:FTS) is one of Canada’s most dependable utility companies. Supplying power across Canada, the U.S., and the Caribbean, it is an essential service for its customers.
One of Fortis’s claims to fame is being a Dividend King. That means that it has raised its dividend every single year for 50 years. Company management aims for 4-6% dividend increases through 2028, so it looks like FTS will retain its kingly reputation for some time to come.
As a utility, Fortis has a lot of debt, which means that its interest expenses will go down, and its earnings will probably go up if the Bank of Canada keeps cutting interest rates. Despite this clear catalyst, the stock trades at just 18 times earnings, which makes it a possible value play at today’s prices.
