The Canadian government introduced the TFSA (tax-free savings account) in 2009 to encourage citizens to save more. It allows investors to earn tax-free returns on a specified amount called contribution room. For this year, the Canadian Revenue Agency has fixed the contribution room at $7,000. If you still need to max out your limit, here are three top stocks that you can add to earn superior returns.
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WELL Health Technologies
WELL Health Technologies (TSX: WELL) is a tech-enabled healthcare company focusing on developing technologies and services to support healthcare providers in delivering positive patient outcomes. Supported by its healthy first-quarter performance, the announcement of a share repurchase plan, and healthy growth prospects, the company has delivered around 26% returns this year, outperforming the broader equity markets.
Given its long-term growth potential, I expect the uptrend to continue. The digitization of patient records, increased usage of software services in the healthcare segment, and growth in virtual healthcare services have created long-term growth potential for WELL Health. Moreover, the company continues to develop new innovative products, make strategic partnerships, and continue with acquisitions, which can strengthen its position in the digital healthcare space. Further, it has adopted a cost-optimization program to improve its operational efficiency and profitability. So, its growth prospects look healthy.
Despite the recent increase in its stock price, WELL Health’s valuation looks attractive, with its NTM (next 12 months) price-to-sales and NTM price-to-earnings multiple at 1.2 and 18, respectively. Considering all these factors, I believe WELL Health would be an excellent addition to your TFSA.
Dollarama
Dollarama (TSX: DOL) is a discount retailer with extensive presence across Canada. Supported by its superior direct sourcing and efficient logistics, the company has been able to offer various customer products at attractive prices, thus allowing it to enjoy healthy same-store sales irrespective of the macro environment. Further, the company is expanding its footprint by adding 60 to 70 stores annually and expects to reach a total store count of 2,000 by 2031. Given its efficient capital model, quick sales ramp-up, and lower average payback period, these expansions could boost its top and bottom lines.
Further, Dollarama has increased its stake in Dollarcity, a Latin American value retailer, from 50.1% to 60.1%. Besides, Dollarcity has plans to add around 500 stores over the next six years to increase its store count to 1,050 by 2031. The increased stake and expanding store count could boost Dollarcity’s contribution towards Dollarama. Moreover, Dollarama has rewarded its shareholders by raising its dividends 13 times since 2011, making it an excellent buy.
goeasy
goeasy (TSX: GSY) is a Canadian subprime lender that has expanded its loan portfolio at an annualized rate of 35% since 2019. Its weighted average interest rate has declined from 40% in 2019 to 30.3% in 2023, while the net charge-off rate has declined from 13.3% to 8.9%. Amid these solid operating metrics, the company’s top line and free cash flows from operations grew at an annualized rate of 20% and 33%, respectively. Despite its strong growth, the company has acquired just 2% of the $218 billion Canadian subprime market. So, its scope for expansion looks solid.
Meanwhile, goeasy continues to expand its product range to cover a broad customer base. Besides, it is strengthening its distribution channels and expanding geographically to attract new customers. Further, improving economic activities amid falling interest rates could also increase credit demand, thus benefiting the company. It also strengthened its financial position by raising $200 million by issuing senior unsecured notes.
Moreover, the company has raised its dividends for the last 10 years at an annualized rate of 30%, while its forward yield stands at a juicy 2.3%. Considering all these factors, I am bullish on goeasy.
