When it comes to building your Tax-Free Savings Account (TFSA), Canadian stocks should still be your first choice. While U.S. and international markets may offer exciting opportunities, the advantages of sticking with homegrown companies can’t be ignored, especially amidst trade war catastrophes. From tax benefits to strong long-term growth potential, stocks like Canadian National Railway (TSX:CNR) and Kinaxis (TSX:KXS) offer compelling reasons to keep your investments within the TSX.
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CNR stock
Canadian National Railway is a cornerstone of North America’s transportation network, playing a vital role in moving goods across Canada and into the U.S. and Mexico. While 2024 presented some challenges, the company remains a solid long-term investment. Its recent earnings show that while revenue came in slightly below expectations at $4.4 billion, missing estimates by just a fraction, its commitment to efficiency and infrastructure spending continues to drive value. The company’s adjusted earnings per share (EPS) of $1.82 fell short of the anticipated $1.92. But with a long track record of resilience, minor setbacks like these are unlikely to derail its trajectory.
CNR’s future looks bright, with management forecasting 10% to 15% growth in adjusted diluted EPS for 2025. The company is also investing heavily in its network, committing approximately $3.4 billion to capital expenditures to ensure long-term efficiency and reliability. Perhaps most importantly for TFSA investors, CNR recently announced a 5% increase in its dividend, marking the 29th consecutive year of dividend hikes. This consistency makes it a prime candidate for tax-free compounding within a TFSA, allowing investors to reinvest dividends without worrying about tax implications.
Kinaxis stock
On the tech side, Kinaxis is a strong growth stock in Canada’s expanding technology sector. The company specializes in supply chain management software, helping global businesses navigate disruptions and optimize logistics. Its most recent earnings report showed an 11% year-over-year increase in revenue to $123.9 million, driven by 17% growth in its Software-as-a-Service (SaaS) revenue. As supply chains become more digitized, Kinaxis is well-positioned to capitalize on increasing demand.
Kinaxis has set its total revenue guidance for 2025 between $535 million and $550 million, with SaaS revenue expected to grow by 11% to 13%. This growth is supported by continued advancements in artificial intelligence (AI), including new capabilities in Generative AI and Agentic AI. With global supply chain complexities on the rise, Kinaxis provides essential solutions that companies are willing to invest in, giving it a strong competitive edge.
Winning combo
Investing in both CNR and KXS within a TFSA offers a balanced approach that combines stability and growth potential. CNR provides reliable dividends and a proven track record, making it a strong foundation for a TFSA. Meanwhile, Kinaxis offers the potential for higher returns through technological innovation. This can significantly boost portfolio performance over time. By holding both, investors benefit from diversification within the Canadian market, reducing risk while capturing growth.
One of the biggest advantages of keeping these stocks in a TFSA is the tax efficiency. Dividends from Canadian companies, such as CNR, are not subject to withholding tax within a TFSA, making them even more attractive. Meanwhile, capital gains from high-growth stocks like Kinaxis remain completely tax-free, allowing investors to maximize their long-term returns without worrying about paying taxes on their gains.
Bottom line
Despite the appeal of international investments, Canadian stocks continue to offer some of the best opportunities for building long-term wealth. The combination of stability, dividend growth, and innovation within the TSX makes it a great market for TFSA investors. While it’s always smart to diversify, keeping a strong base of high-quality Canadian stocks ensures your portfolio benefits from both security and upside potential.
Building your TFSA with a mix of reliable dividend stocks like CNR and high-growth companies like KXS is a strategy that can generate strong returns over time. Both companies are leaders in their respective industries, offering a compelling mix of resilience and innovation. For investors looking to make the most of their TFSA, Canadian stocks like these should still be at the top of the list.
