Canadian investors can leverage the Tax-Free Savings Account (TFSA) to build wealth without the drag of taxes. Any capital gains, dividends, or interest earned within the TFSA are tax-free. Over time, these tax-free earnings can significantly amplify returns, making the TFSA a solid tool for long-term financial growth.
Further, investors should look for Canadian stocks with strong fundamentals and solid growth potential. These stocks will likely beat the benchmark index substantially and generate significant tax-free returns. Let’s take a closer look at some of the top TFSA stocks to buy now.
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TFSA stock #1
CES Energy Solutions (TSX: CEU) is one of the top TFSA stocks to buy now. The company manufactures advanced consumable chemical solutions for the oilfield industry. Its asset-light business model, high exposure to all major U.S. basins, and recurring production chemical revenues position it well to generate significant free cash flow in all commodity cycles.
The growing complexity of oil and gas extraction in North America has driven increased demand for CES’s specialized solutions. As operators push for higher efficiency with techniques like longer lateral drilling, enhanced hydraulic fracturing, and pad optimization, CES is poised to capitalize on this shift with its innovative production and drilling chemicals that help maximize output.
Furthermore, CES will likely benefit from favourable commodity prices, rising adoption of advanced chemical technologies, and steady upstream activity in North America. Moreover, CES’s vertically integrated business model and strategic procurement practices provide a competitive edge and support its growth.
TFSA stock #2
Brookfield Asset Management (TSX: BAM) is another top stock to buy now. The alternative asset management company is one of the early investors in high-growth sectors such as nuclear power, renewable energy, and artificial intelligence (AI) infrastructure. These investments provide it with significant, multi-year growth opportunities.
Brookfield benefits from its asset-light model and focus on high-quality investments. The company distributes a significant amount of its earnings to enhance its shareholders’ value. Notably, its distributable earnings are mostly derived from fee-related income, which adds stability and supports its payouts.
In a strategic move, Brookfield consolidated its credit operations into the Brookfield Credit division, which now manages $245 billion in fee-bearing capital. This division is poised for significant growth, targeting $600 billion within five years, marking an aggressive expansion in the credit space.
Looking ahead, Brookfield aims to double the size of its business within the next five years, setting a goal of $1 trillion in fee-bearing capital. This expansion is expected to drive over 15% annual growth in both earnings and dividends. Further, as Brookfield’s capital base expands, so too will its earnings, with fee-related earnings projected to reach $5 billion annually.
Overall, Brookfield’s exposure to high-growth sectors, growing fee-bearing capital, and higher fee-related income position it well to deliver solid capital gains and dividends.
TFSA stock #3
Shopify (TSX: SHOP) is another top TSX stock to add to your TFSA portfolio. With its omnichannel commerce solutions, the company is well-positioned to capitalize on the shift toward multi-channel selling platforms. Shopify has maintained impressive growth despite macroeconomic challenges, consistently exceeding 20% in gross merchandise volume (GMV) over the past five quarters. This strong performance bolsters its revenue and free cash flow.
The company’s payment solutions have gained significant traction, driving increased GMV and highlighting the power of Shopify’s integrated ecosystem. This growth is further supported by the expansion of sales and marketing channels, which expands its merchant base.
Shopify Payments and Shopify Capital will drive future GMV and merchant base. Additionally, the company’s point-of-sale (POS) system is gaining traction in offline retail and B2B markets, presenting further growth opportunities. Shopify’s international expansion and AI-driven enhancements are poised to accelerate its growth and optimize operations.
Further, with a shift toward an asset-light model, Shopify is well-positioned for sustainable earnings growth. In summary, Shopify is an attractive investment to capitalize on opportunities stemming from digital transformation.
