TFSA: 3 Top-Tier TSX Stocks for That $7,000 Contribution

The time has come to invest in yourself by making sure to meet that contribution limit for 2024 and get ready for 2025.

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 December 19, 2024 9:45 pm EST

The $7,000 contribution limit for 2024’s Tax-Free Savings Account (TFSA) offers a golden opportunity to grow your wealth completely tax-free. Maxing out your TFSA before the new year is one of the smartest financial decisions you can make to kick off 2025. Imagine every dividend payment and capital gain being yours to keep, free from the taxman’s grasp. It’s a no-brainer if you’re serious about long-term financial growth. Whether you’re saving for retirement, a big purchase, or just building your wealth, the TFSA is the ultimate tool. So, let’s look at three standout performers offering a mix of stability, growth, and income potential.

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Fairfax

Fairfax Financial Holdings (TSX:FFH) built a stellar reputation as a value investor’s dream. This insurance and investment giant, helmed by Prem Watsa, often called Canada’s Warren Buffett, has delivered exceptional results over the years.

Recent earnings showcased a solid $34.17 billion in revenue, a 10.2% year-over-year increase. While some companies falter during economic turbulence, Fairfax thrives, thanks to its diversified investment portfolio and strategic approach. Its trailing price-to-earnings (P/E) ratio of 8.59 and forward P/E of 9.25 indicate it’s attractively valued. Thus offering plenty of room for long-term growth. Add to that its forward dividend yield of 1.02%, and you’ve got a stock that balances income and appreciation beautifully.

Topicus

If you’re looking for growth, Topicus.com (TSXV:TOI) is a tech marvel that deserves a spot in your TFSA. Specializing in acquiring and scaling vertical market software companies, Topicus has carved out a unique niche. Its recent earnings highlight why it’s a standout, with quarterly revenue growth of 12% year over year and a whopping 29.8% increase in quarterly earnings.

While its forward P/E ratio of 46.95 might seem steep, it reflects the market’s confidence in its potential to dominate its space. With $234.6 million in cash and strong free cash flow of $304.74 million, Topicus is well-positioned to fund future acquisitions and drive long-term value. For TFSA investors eyeing growth, it’s a stock that combines innovation with proven financial performance.

BMO stock

For those craving stability and income, Bank of Montreal (TSX:BMO) is a classic choice that never goes out of style. As one of Canada’s oldest and largest banks, BMO has a rock-solid foundation and a proven track record of delivering for shareholders. Recent earnings showed net income growth of 19.3% year over year, supported by its robust revenue base of $31.41 billion.

The forward dividend yield of 4.62% is a standout, offering steady income in any market condition. And with a price-to-book ratio of just 1.25, BMO is attractively valued compared to its peers, making it an excellent buy for those looking to capitalize on financial sector stability. Its extensive reach, combined with digital banking innovations, ensures it remains a dominant player well into the future.

Why it matters

So, why act now? Beyond maximizing your 2024 contribution room, dividends from Fairfax and BMO can be reinvested tax-free, amplifying growth. Topicus’s strategy of reinvesting its own cash flows into acquisitions aligns perfectly with a long-term growth strategy. Every dollar you invest today is a dollar that can work harder, faster, and more efficiently.

The timing couldn’t be better. Fairfax is currently trading below its 52-week high, offering an attractive entry point. Similarly, Topicus has seen a slight dip in recent weeks, making it a compelling buy for those who believe in its long-term potential. BMO, meanwhile, continues to strengthen its financial position, with recent earnings showing resilience despite broader economic challenges.

Looking at the future outlook, all three companies are poised for continued success. Fairfax’s expertise in capital allocation and its focus on undervalued assets make it a resilient pick during market volatility. Topicus’s acquisition pipeline ensures it stays ahead of the curve in the tech sector, while BMO’s investments in digital transformation keep it relevant and competitive in an ever-changing banking landscape.

Bottom line

Ultimately, maxing out your TFSA before the year ends is the best way to take control of your financial journey. With Fairfax, Topicus, and BMO in your portfolio, you’re not just building wealth. You’re building confidence, security, and the freedom to achieve your goals. So, take that $7,000, put it to work, and let the power of tax-free growth propel you into a prosperous 2025.