A Tax-Free Savings Account (TFSA) allows Canadians (above 18 years) to earn tax-free returns on a specified invested amount called contribution room. For this year, the Canadian Revenue Agency has fixed the contribution room to $7,000, while the cumulative room for investors who were 18 years and above in 2009 is $102,000. Meanwhile, investors must be careful while investing through TFSA in this volatile environment, as the stock price decline and subsequent selling could lead to capital erosion and a decrease in cumulative limit. Against this backdrop, let’s look at three TSX stocks you can buy and hold forever.
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Enbridge
Enbridge (TSX: ENB) transports oil and natural gas across North America. It is also involved in natural gas storage and distribution business and renewable energy generation. The company’s regulated cost-of-service tolling frameworks, long-term contracts, and PPAs (power-purchase agreements) shield its financials from market volatility, thus delivering stable and predictable cash flows.
Supported by these stable financials, the Calgary-based energy company has returned around 866% in the last 20 years at an annualized rate of 12%. It has also enhanced its shareholders’ value by paying dividends for 69 years. It has also raised its dividends for the previous 30 years and offers a forward dividend yield of 5.98% as of the February 5th closing price.
Moreover, Enbridge continues to expand its assets by making annual investments of $8-$9 billion. Its recent acquisition of three utility assets in the United States could improve its cash flows further while lowering its business risks. Amid these growth initiatives, the company’s management expects its adjusted EBITDA to grow by 7-9% annually in the coming years, thus making it an excellent addition to your TFSA.
Hydro One
I have chosen Hydro One (TSX: H), a pure-play electric transmission and distribution company, as my second pick. Meanwhile, the Toronto-based utility company generates stable and predictable cash flows, with 99% of its business fully rate-regulated and no material exposure to commodity price fluctuations. The company has grown its rate base at an annualized rate of 5% since 2018, thus boosting financials. Amid this financial growth, the company has returned 95% over the last five years at an annualized rate of 14.3%.
Meanwhile, the electricity demand is rising amid favourable government policy changes, technological development, and acceleration in industrial activities. The increasing electricity demand could boost the demand for Hydro One’s services. Amid rising demand, the company continues to expand its asset base with the $11.8 billion capital investment plan, which could grow its rate base at a 6% CAGR (compound annual growth rate) through 2027. Its cost-cutting initiatives could improve operating efficiencies, thus driving profitability. Meanwhile, the company’s management projects its EPS (earnings per share) to expand at an annualized rate of 5-7% through 2027 and is also hopeful of raising its dividends at a 6% CAGR. Considering all these factors, I believe Hydro One would be an excellent buy.
Waste Connections
Waste Connections (TSX: WCN) is another excellent addition to your TFSA due to its consistent financials and solid returns. The solid waste management company operates primarily in secondary and exclusive markets across the United States and Canada. So, it faces lesser competition and enjoys higher margins. Besides, its organic growth and aggressive expansions have boosted its financials and stock price. Over the last 10 years, the company has returned 490% at a 19.5% CAGR.
Moreover, WCN is building 12 renewable natural gas facilities, which could become operational next year. These facilities could contribute $200 million to its adjusted EBITDA annually. Further, the company is also adopting new technologies to improve its operating margins and employee safety. Its innovative approach to employee engagement has lowered voluntary turnover, thus aiding in expanding its operating margins. Amid these growth initiatives, the company’s management projects its top line to grow in the mid- to high single digits while its adjusted EBITDA could grow in the high single-digit. Along with these healthy growth prospects, WCN also rewards its shareholders with consistent dividend growth, thus making it an excellent long-term addition to your TFSA.
