The Canadian stock market is ripe for investment as the oil and gas sector makes a new high. Moreover, faster interest rate cuts could revive the business environment in a year and boost growth. The $7,000 Tax-Free Savings Account (TFSA) contribution room is a golden opportunity to grow your money severalfold as your investments grow tax-free. It means that any dividends you receive or gains you make on a stock sale attract no tax.
If a $7,000 investment doubles to $14,000 three years from now and you sell the stock to buy new stocks, you only pay brokerage fees. Rebalancing and reinvesting can help you grow a million-dollar TFSA portfolio in the next 15–20 years and be a tax-free millionaire.
Top TFSA stocks to buy with $7,000
The journey towards $1 million begins with your first investment. But it doesn’t end with it. Remember, not all your investments will generate profits. Hence, it would be better to diversify your portfolio across sectors, stock types, and asset classes – commodities, real estate, and bitcoin.
Telus Corporation
Telus Corporation (TSX:T) stock is trading near its pandemic low of above $21 as the overall telecom sector is undergoing restructuring. A restructuring is difficult as the overall business faces cost cuts. Unproductive businesses are closed, losses are borne, and jobs are slashed. However, restructuring brings with it efficiency. Telus has high leverage on its balance sheet, which is affecting its profits. Despite this, the management increased the fourth-quarter dividend by 3.4%. Another 3.4% increase is likely in the second quarter of next year.
Telus stock is also falling because of its high dividend payout ratio and BCE’s recent pause in dividend growth. The third-quarter earnings brought some good news. Telus’ dividend payout ratio has fallen to 77% from 88% a year ago, coming closer to its target of 60–75%. Although the telco is going through risks, it has the resources and market share to recover and tap the 5G growth opportunities from cloud networking and artificial intelligence (AI). All good things come to those who wait.
Buying into the Telus dividend reinvestment plan will help you earn higher passive income as it will automatically reinvest the dividend to buy more Telus shares without any brokerage fees.
Constellation Software stock
Constellation Software (TSX:CSU) is a stock to buy at any given point even though it is trading near its all-time high. Buying just one share will take $4,588, but the growth is also attractive. The company’s acquisition of vertical-specific software companies is seeing stronger organic growth as the business environment improves. The rollout of 5G could give software companies ample growth opportunities. BMO Capital has upgraded its price target on Constellation Software due to stronger-than-expected EBITDA performance from its affiliates, Topicus and Lumine.
These companies have spun off from Constellation and are trading separately on the stock exchange. Their stock performance is beneficial for Constellation as it is a major shareholder. Buying just one share is equivalent to building the entire portfolio.
HIVE Digital Technologies
You could consider adding a small portion of your portfolio to HIVE Digital Technologies (TSXV:HIVE). The bitcoin mining and blockchain company has strong growth opportunities in President-elect Donald Trump’s administration. However, until the new president introduces new policies, it is difficult to say if the policies will favour Bitcoin or not. At the same time, HIVE’s graphics processing unit (GPU) data centre brings strong growth opportunities as AI at the edge becomes more prevalent in the 5G economy where almost all electronic devices are connected to the internet.
HIVE stock can act as a hedge and give you returns when everything fails.
