Investing in shares of fundamentally strong Canadian companies with strong growth prospects can help investors achieve above-average returns and build substantial wealth over time. Leveraging the Tax-Free Savings Account (TFSA) can further enhance investor gains.
Notably, any capital gains, dividends, and interest income are not taxed within the TFSA. This makes it an ideal vehicle for maximizing investment returns, particularly over the long term. For 2024, the TFSA contribution limit stands at $7,000, providing ample room for investment.
Against that backdrop, here are three Canadian stocks worth buying and holding within a TFSA.
TFSA stock #1
goeasy (TSX:GSY) is an excellent choice for TFSA investors looking for a stock to buy and hold forever. This financial services company combines growth, income, and value, making it a compelling investment for long-term investors.
This subprime lender has an impressive track record of delivering strong financial results. The company’s revenue and earnings have consistently grown at a double-digit pace. This consistent performance has led to significant shareholder returns.
Thanks to its strong financial performance and commitment to enhancing shareholder value through dividend growth, goeasy stock has consistently outperformed the broader market. Over the past year, the stock has appreciated by approximately 44%. Moreover, it has delivered a compound annual growth rate (CAGR) of 31.6% over the last five years, translating into a remarkable 296% return in capital gains.
Its leadership in the subprime lending market, geographical expansion, omnichannel offerings, diversified funding sources, and steady credit performance position the company for continued growth. These factors are expected to support goeasy’s ability to sustain double-digit revenue and earnings growth. This, in turn, will drive future dividend payments and its share price.
Despite the significant increase in its value, goeasy stock trades at the next 12-month price-to-earnings (P/E) ratio of just 9.8, implying the stock is undervalued considering its high earnings growth. Its low valuation presents an excellent opportunity to buy a high-quality growth stock at a reasonable price.
TFSA stock #2
Shopify (TSX:SHOP), with its solid long-term growth potential, can be a valuable stock for TFSA investors. With its comprehensive and unified commerce solutions, the Canadian tech giant is well-positioned to capitalize on the ongoing shift in the selling models towards omnichannel platforms.
What stands out is Shopify’s ability to expand its gross merchandise volume (GMV) and gross payments volume (GPV) regardless of market conditions. This allows Shopify to deliver durable revenue growth. Further, Shopify’s innovative product offerings, such as Payments and Capital, and the addition of new sales and marketing tools consistently drive its merchant base and enhance its market share in the e-commerce space.
Looking ahead, Shopify will benefit from the growing demand for omnichannel commerce platforms. Further, geographic expansion and integration of artificial intelligence (AI) technology in its offerings bode well for growth. Additionally, Shopify’s growing active merchant base, cross-selling opportunities, and transition towards an asset-light business model will likely support its financials and share price.
TFSA stock #3
TFSA investors could consider investing in shares of Alimentation Couche-Tard (TSX:ATD) for stability, growth, and income. The company operates convenience stores, retails fuel, and offers electric vehicle (EV) charging. Thanks to its resilient business model and ability to drive traffic in all market conditions, Couche-Tard consistently delivers robust financials and above-average returns.
For instance, ATD’s revenue and earnings have grown at a CAGR of 6.2% and 15.2%, respectively, over the past decade. Moreover, it increased its dividend per share at a CAGR of 25.6% during the same period. Thanks to its impressive financials, Couche-Tard stock has grown at a CAGR of over 19% in the past decade, delivering an overall capital gain of over 485%.
Looking forward, Alimentation Couche-Tard’s value pricing strategy, extensive store presence, and improving operational efficiencies will likely support its sales and earnings. In addition, its emphasis on strategic acquisitions will likely expand its store base, drive traffic, and accelerate its growth rate. Moreover, its focus on expanding its private label brands in its sales mix augurs well for margin expansion and long-term growth.
