Canadian investors planning to invest in stocks can leverage the Tax-Free Savings Account (TFSA). The TFSA helps you to grow your investments without worrying about taxes on capital gains, dividends, or interest earned. This means any growth within the account remains entirely tax-free, making it an excellent option for building wealth. The TFSA contribution limit is $7,000 for 2024, providing an opportunity to invest in shares of fundamentally strong companies and generate tax-free capital gains and dividend income.
With this background, here are the top three TSX stocks to buy now with your $7,000 contribution.
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Bombardier
TFSA investors could consider investing in Bombardier (TSX: BBD.B) stock. The company, which manufactures business jets, benefits from the solid demand for its new lineup of medium and large business jets. Alongside new jet sales, Bombardier is growing its share in the pre-owned aircraft market, which will likely generate steady revenues in the coming years.
Furthermore, Bombardier is focusing on diversifying its sales across defence and services. This will help expand its revenue and improve profitability.
Bombardier is well-positioned to deliver strong sales over the next decade. Further, it is focused on strengthening its balance sheet, improving liquidity, and lowering debt. This financial discipline and revenue diversification will help the company grow profitably and navigate economic challenges. While Bombardier stock has gained quite a lot (about 89% year-to-date), its stellar growth across all business segments suggests that the upward momentum in its stock will likely sustain.
Hydro One
Hydro One (TSX: H) could be a compelling choice for TFSA investors seeking tax-free capital gains and dividend income. Hydro One is an electric power transmission and distribution company. It consistently generates solid earnings and predictable cash flow, which support its dividend payouts and drive shares higher.
Its robust financials and low-risk, rate-regulated business enable this utility company to deliver growth in all market conditions. Further, Hydro One’s growing rate base suggests that the momentum in its earnings will sustain in the coming years. Hydro One projects its rate base to grow by 6% annually in the medium term. This will help the company expand its earnings per share (EPS) by 5–7% annually during the same period. Further, Hydro One will likely increase its dividend by 6% through 2027.
In summary, the hydro power producer’s resilient business model, solid balance sheet, and cost-reduction initiatives will continue to drive profitability. This will help the company grow its dividend and deliver solid capital gains, making it one of the top TSX stocks for TFSA investors.
goeasy
TFSA investors could consider adding goeasy (TSX: GSY) stock. This financial services company has strong underwriting capabilities, omnichannel offerings, and a diverse product range, which enables it to consistently grow its financials at a double-digit rate.
Thanks to its high growth and steady performance, goeasy stock has outperformed the broader equity market with its returns. GSY stock is up about 75% in one year. Moreover, it has gained over 243% in five years. Further, it has enhanced its shareholders’ value through higher dividends.
Looking forward, goeasy is well-positioned to capitalize on the large subprime lending market. Further, its geographical expansion, diversified funding sources, steady credit performance, and operating efficiency will drive its revenue and earnings.
