Tax-Free Savings Account (TFSA) investors looking to buy and hold stocks for the long run should focus on companies with fundamentally strong businesses and multiple growth catalysts. These stocks are most likely to deliver above-average returns.
With this background, here are three Canadian stocks for TFSA investors to generate solid capital gains and dividends.
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Stock #1
Dollarama (TSX: DOL) is one of the top Canadian stocks TFSA investors could buy and hold for the long term. Its resilient business model will likely add stability to your portfolio. Further, its solid growth will support its share price. Moreover, the discount retailer will also enhance its shareholders’ value through consistent dividend hikes.
Dollarama sells a wide range of consumable products at low and fixed prices. Its value proposition makes it relatively immune to economic downturns. Thanks to its defensive business model and expanding store count, Dollarama continues to drive traffic at its stores, which supports its financials.
Given its consistent growth, Dollarama stock jumped about 39% over the past year and gained over 111% in three years. Beyond generating above-average capital gains, Dollarama has raised its dividend 13 times since 2011.
Looking ahead, the retailer is expanding its store network, focusing on efficient sourcing, and taking cost-control measures to drive its bottom line. Higher earnings will drive its share price and enable Dollarama to return significant cash to its shareholders.
Stock #2
TFSA investors can consider TerraVest Industries (TSX: TVK) stock. This leading industrial manufacturer has delivered stellar returns in the past and has outpaced the benchmark index by a significant margin. For instance, TerraVest stock gained about 153% in one year and over 485% in three years.
The company’s diversified portfolio, strong demand for compressed gas distribution equipment and residential and commercial petroleum tanks, and its solid competitive positioning in several high-growth markets will support its growth. Moreover, its expansion in the international markets positions it well to capture new business opportunities. Additionally, its strategic acquisitions will boost its market presence and accelerate its growth rate.
TerraVest is also focusing on improving its manufacturing efficiency, which will generate incremental earnings and boost its share price. Moreover, its strong balance sheet and solid cash flow will enable it to invest in growth initiatives and enhance shareholder value over time.
Stock #3
Brookfield Asset Management (TSX: BAM) is another compelling investment option for your TFSA portfolio. This alternative asset management company has been growing rapidly and has delivered a capital gain of over 51% in one year. Brookfield Asset Management stock has significant upside potential in the long run due to its exposure to high-growth sectors such as artificial intelligence (AI) infrastructure, renewable energy, and nuclear power.
The company’s asset-light business model, diverse portfolio, focus on high-quality investments, and consolidation of credit division augur well for growth. Further, it will benefit from an expanding base of fee-bearing capital and growing fee-related income. Moreover, Brookfield’s strong balance sheet with significant cash reserves and no debt will enable it to capitalize on growth opportunities and enhance its shareholder value through dividends.
Brookfield Asset Management plans to double its business over the next five years, which implies double-digit earnings growth. This aggressive growth target is expected to support higher dividend payouts and generate steady capital gains.
