Canadian investors should buy and hold blue-chip stocks in a TFSA (Tax-Free Savings Account) to build long-term wealth. Any gains derived from qualified investments, including stocks, are exempt from taxes if held in the TFSA. Moreover, equities have showcased an ability to deliver inflation-beating returns to investors.
Alternatively, Canadians should understand that investing in stocks requires an investment horizon of at least a decade (if not more), allowing you to take advantage of the power of compounding, which eventually results in game-changing returns. Here are three top TSX stocks you can buy and hold forever in a TFSA.
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Canadian National Railway stock
Valued at $100 billion by market cap, Canadian National Railway (TSX: CNR) is engaged in the rail and related transportation business. Its portfolio of goods includes petroleum and chemicals, grain and fertilizers, coal, metals and minerals, forest products, and automotive products. With an expansive network of 19,500 route miles spanning Canada and the U.S., Canadian National Railway is among the largest railroad companies in the world.
Despite a challenging macro environment, Canadian National Railway increased adjusted earnings per share by 5% year over year to $1.84 in the second quarter (Q2) of 2024. The TSX stock trades at a forward price-to-earnings multiple of 17.7 times, which is not too expensive, given that adjusted earnings are forecast to expand by 11% annually in the next five years.
Canadian National Railway also pays shareholders an annual dividend of $3.38 per share, which translates to a yield of 2.1%. Further, these payouts have more than tripled in the last decade.
Waste Connections stock
Valued at $62 billion by market cap, Waste Connections (TSX: WCN) provides non-hazardous waste collection, transfer, disposal, and resource recovery services in North America. Part of a recession-resistant industry, Waste Connections owns solid waste collection operations, transfer stations, municipal solid waste landfills, recycling operations, intermodal operations, and liquid waste injection wells.
In the June quarter, Waste Connections increased revenue by 11.2% and adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) by 16.4% due to price-led organic solid waste growth and accretive acquisitions.
Waste Connections now expects to end 2024 with sales of $8.85 billion and EBITDA of $2.9 billion, indicating a margin of 32.8%. If we account for dividend reinvestments in the last five years, Waste Connections stock has more than doubled investor returns.
WSP Global stock
The final TSX stock on the list is WSP Global (TSX: WSP), a company valued at $30 billion by market cap. WSP operates as a professional services consulting firm in North America, the U.K., Europe, Australia and other markets. It advises, plans, designs, and manages projects for rail transit, aviation, highways, bridges, tunnels, and urban infrastructure for public and private companies.
In Q2 of 2024, WSP Global reported net revenue of $3 billion, an increase of 9.1% year over year. WSP attributed organic growth to its revenue expansion as it experienced double-digit growth in the U.K. and New Zealand.
It ended Q2 with an order backlog of $14.7 billion, which represents almost 12 months of revenue following an organic order intake of $4.3 billion. Its adjusted EBITDA surpassed $500 million, an increase of 12.6% year over year and indicating a margin of 17.4%.
The Foolish takeaway
Each of the three stocks discussed here is positioned to beat the broader markets over time due to its diversified cash flow, strong balance sheets, and focus on margin expansion.
