Easing trade tensions has improved investors’ sentiments, increasing global equity markets. The S&P/TSX Composite Index is up 15.2% from its last month’s lows and is trading just 1% lower than its all-time high. However, concerns over the slowdown in the global economy still persist. So, investors should be careful while investing through their TFSA (Tax-Free Savings Account), as a decline in stock values and subsequent selling could lead to capital erosion and a lower TFSA contribution limit. Against this backdrop, let’s look at three top Canadian stocks you can add to your TFSA now.
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Hydro One
Hydro One (TSX:H) is a Canadian electric utility company that transmits and distributes electricity to 1.5 million customers. Its rate-regulated asset base and lack of exposure to power production shield its financials from commodity price fluctuations, thus providing financial stability. The Toronto-based utility company has been expanding its rate base at an annualized rate of 5.1% since 2018, driving its financials and stock price. Over the last eight years, the company has returned 182% at an annualized rate of 13.8%.
Moreover, Hydro One is expanding its asset base with its $11.8 billion capital investment plan, which could grow its rate base at a 6.6% CAGR (compound annual growth rate) to $32.14 billion. The favourable rate revisions and the company’s initiatives to improve its operating efficiency could support its margin expansion in the coming quarters. Amid these growth prospects, Hydro One’s management expects to raise its dividends at an annualized rate of 6% through 2027, thus making it an excellent addition to your TFSA.
Enbridge
Second on my list is Enbridge (TSX:ENB), which has an exceptional record of paying dividends. The Calgary-based midstream energy company transports oil and natural gas across North America under a tolling framework or long-term take-or-pay contracts. It also operates low-risk natural gas utility assets and PPA (power-purchase agreements) powered renewable energy-producing facilities. Therefore, the company’s financials are less susceptible to economic cycles, thus generating reliable cash flows and paying dividends uninterrupted for the previous 70 years. Also, the company has raised its dividends at an annualized rate of 9% for the last 30 years, while its forward dividend yield stands at an attractive 6.07%.
Moreover, the global energy demand could grow at an annualized rate of 8% through 2040. Meanwhile, Enbridge is expanding its rate base with a $26 billion secured capital program, positioning it to benefit from demand expansion. Last year, the company acquired three natural gas utility assets in the United States. The contribution from these acquisitions and organic growth could continue to drive its cash flows, thus making its future dividend payouts safer.
Waste Connections
Waste Connections (TSX:WCN) is another Canadian stock that I believe would be an excellent addition to your TFSA, given the essential nature of its business, solid financials, and healthy growth prospects. The waste management company has expanded its business through strategic acquisitions and organic growth, thus boosting its financials. Since 2020, the company has made 110 acquisitions, outlaying $6.5 billion. It operates predominantly in secondary and exclusive markets, thus facing less competition and enjoying higher margins. Supported by these solid financials, the company has returned around 510% over the last 10 years at an annualized rate of 19.8%.
Meanwhile, WCN has acquired several assets this year, contributing US$125 million to its annualized revenue. Amid its solid financial position and healthy cash flows, the company’s management expects 2025 to witness above-average acquisition activity. The company is also building 12 renewable natural gas energy facilities that can become operational next year. These facilities can contribute US$200 million to the company’s annualized earnings before interest, taxes, depreciation, and amortization. These growth prospects could continue to drive its financials and stock price in the coming quarters.
