TFSA: 3 Top TSX Stocks for Your $7,000 Contribution

These three are top TSX stocks for investors to consider.

Amy Legate-Wolfe

Amy became interested in investing in 2018 after having her first daughter. After receiving a masters degree in journalism from Western University, she became frustrated that the finance industry remained a confusing place for Canadians like her: new parents, millennials, and other young people who needed to understand their finances. Now, Amy focuses on tech companies and renewable energy for growth opportunities, coupling that with long-term investing strategies and equities. She also provides investors with a daily newsletter, Canada Stock Digest, for daily market updates. Before joining Motley Fool Canada, she wrote for major news organizations including HuffPost, CTVNews.ca, and CBC. When she’s not researching investing strategies, Amy’s time is pretty much monopolized by her two wild daughters, but in what little spare time she has she loves to do yoga, go on walks with her dog, and travel with her husband. Follow Amy on LinkedIn and Canada Stock Digest. Favorite Investment Quote: “October: This is one of the particularly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February.” – Mark Twain

Published November 19, 2024 11:45 am EST

If you’re thinking about where to invest your annual $7,000 Tax-Free Savings Account (TFSA) contribution, there are some strong cases out there to be made. But today, we’re looking at three companies providing stability, growth, and consistent returns — ideal qualities for a tax-sheltered account like a TFSA. Here’s why each of these stocks makes a great pick.

Blocks conceptualizing Canada's Tax Free Savings Account — Source: Getty Images

FirstService

FirstService (TSX:FSV) has shown exceptional growth in the property services industry, where its third-quarter 2024 results underscore its resilience and strong operational performance. The TSX stock reported $1.4 billion in revenue, up by a notable 25% from last year’s $1.1 billion. Plus net earnings of $60.5 million, a significant leap from the prior year’s $32.7 million.

This kind of growth highlights FirstService’s ability to stay competitive in an evolving market. With a diversified portfolio in both commercial and residential property services, FirstService has a robust business model that appeals to investors looking for stability and growth.

The outlook for FirstService continues to look bright, with analysts projecting revenue to hit $5.51 billion in 2025, marking a 12% year-over-year increase. Earnings per share (EPS) are also expected to rise significantly, with predictions pointing to a 48% jump to $3.55. The consensus from analysts is that FirstService’s growth will remain above industry standards, making it a solid choice for your TFSA.

Power stock

Power Corporation of Canada (TSX:POW) is another excellent choice, especially for those interested in diversified financial services. Power stock is a holding company with stakes in insurance, wealth management, and alternative asset investment platforms across North America, Europe, and Asia. Its most recent quarter saw revenues of $34.63 billion, representing an 11.5% increase over the previous year. Net income reached $2.92 billion, and diluted EPS hit $4.39, speaking to the company’s efficiency in driving returns from its diverse assets.

With a forward price-to-earnings (P/E) ratio of 9.17 and a strong track record of profitability, Power is an attractive choice for TFSA investors who seek both growth and a solid dividend yield. The forward dividend yield sits around 4.83%, making it a reliable income-generating asset within a TFSA portfolio. With its low payout ratio and strong balance sheet, Power stock is likely to continue delivering value to shareholders for years to come.

CPKC stock

Canadian Pacific Kansas City (TSX:CP), freshly rebranded from its recent merger with Kansas City Southern, offers a unique investment opportunity in the rail sector. This merger created the first single-line rail network spanning Canada, the United States, and Mexico. The dividend stock’s latest quarterly report shows revenue of $3.8 billion and a healthy operating income of $1.2 billion, reflecting CP’s skillful cost management and expanded market reach.

The integration with Kansas City Southern has allowed CP to enhance its service offerings, adding growth in freight volumes and increasing efficiency — essential in the competitive transport and logistics industry.

The outlook for Canadian Pacific Kansas City remains highly favourable, especially with cross-border trade expected to increase. Analysts project an annual earnings growth rate of 14.1% and annual revenue growth of 7.4% as the company fully leverages its expanded network. CPKC’s strategic positioning in North American transportation makes it a great stock for those looking for growth within a TFSA. Its modest 0.70% dividend yield is well-covered, reflecting a low payout ratio that allows CPKC to reinvest in infrastructure and expansion, fuelling its long-term growth prospects.

Bottom line

With $7,000 to contribute, investors could allocate funds across these three to diversify within a TFSA. FirstService is a great choice for growth-focused investors, as its revenue expansion and market-leading position in property services have been demonstrated through robust earnings. Power, with its stable, higher dividend, is perfect for income-focused TFSA investors who also want growth potential. Meanwhile, CPKC, with its expanded infrastructure and cross-border potential, provides a unique mix of growth and resilience.

These stocks can strengthen any long-term portfolio. Each stock is likely to thrive in a TFSA environment where tax-free compounding can maximize long-term gains.