Investing through a Tax-Free Savings Account (TFSA) is a smart way to grow your money without paying taxes on your gains. Any profits you make from capital gains, dividends, or interest within a TFSA aren’t taxed, which can significantly increase your returns over time.
While the TFSA is an excellent tool for building long-term wealth, the contribution limit is $7,000 for 2024. Canadian investors can use this limit to buy shares of fundamentally strong companies and generate tax-free capital gains and dividend income.
So, if you’re thinking about investing in stocks through a TFSA, here are the top three Canadian stocks to buy now with $7,000.
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TFSA stock #1
TFSA investors could consider investing in shares of the Canadian value retailer Dollarama (TSX: DOL) for its defensive business model, high growth, and resilient dividend payouts. This retailer sells a broad assortment of everyday products at multiple, low, fixed price points. Thanks to its strategic pricing strategy, Dollarama attracts shoppers in all market conditions, driving its sales, earnings, and dividend payouts.
Given its impressive financial performance, Dollarama stock is up about 52% in one year. Moreover, it has grown at a compound annual growth rate of nearly 22% in five years, delivering a capital gain of over 168%. Besides stellar capital gains, this value retailer has enhanced its shareholders’ returns by increasing its dividend 13 times since 2011.
The retailer’s wide product range, value pricing, and significant presence across Canada, with stores in all provinces, will likely drive its top line. Higher sales, direct sourcing and buying capabilities, lean operations, and efficiency initiatives will likely cushion its earnings and drive its future dividends and share price.
TFSA stock #2
goeasy (TSX: GSY) could be a compelling choice for TFSA investors looking to earn substantial tax-free capital gains and dividend income over time. This financial services company specializes in providing loans to subprime borrowers in Canada. While the subprime lending business carries higher potential risks, goeasy’s strong underwriting capabilities, omnichannel offerings, and diverse product range enable it to consistently grow its top and bottom lines at a double-digit rate and maintain steady credit performance.
Thanks to its high growth and resilient business model, goeasy stock has outperformed the broader equity market with its returns. Its stock is up about 50% in one year. Moreover, it has gained over 297% in five years. During the same period, it raised its dividends at a healthy pace.
Looking forward, goeasy is well-positioned to capitalize on Canada’s large subprime lending market with its wide product range, geographical expansion, and diversified funding sources. In addition, steady credit and payment performance and operating efficiency will drive its earnings faster than the sales growth rate. In summary, goeasy is poised to deliver solid capital gains and stellar dividends.
TFSA stock #3
TFSA investors could consider adding Lightspeed (TSX: LSPD) stock. Shares of his technology company have lost substantial value and are down over 40% year to date. Given this notable correction, Lightspeed stock is trading at a next-12-month (NTM) enterprise value-to-sales (EV/sales) multiple of 1.1, which is near an all-time low, making it too cheap to ignore near the current levels.
While Lightspeed stock is absurdly cheap, its fundamentals remain strong, and the company continues to generate solid sales growth. Also, it is focusing on turning profitable and cutting losses.
For example, the company’s sales increased 27% year over year in the first quarter of fiscal 2025. Moreover, adjusted EBITDA of $10.2 million exceeded management’s guidance of $7 million outlook. Lightspeed narrowed its net loss in the first quarter and increased the full-year revenue outlook.
In summary, Lightspeed’s growing high-value customer base, improving average revenue per user, focus on improving unit economics and delivering sustainable earnings, and low valuation are encouraging and will likely drive its share price.
