Canadians looking to grow their wealth efficiently could consider leveraging the Tax-Free Savings Account (TFSA). Since capital gains, dividends, and interest income earned within a TFSA are completely tax-free, the account allows your investments to compound without the drag of taxes, giving your portfolio a significant advantage over time.
The annual TFSA contribution limit is $7,000 for 2025, and the best approach for Canadian investors would be to invest in fundamentally strong stocks that offer a balanced mix of growth, income, and stability. This strategy will help generate solid growth, add stability to your TFSA portfolio, and provide steady income, boosting your chances of achieving significantly higher total returns over time.
With that in mind, here are the high-quality Canadian stocks TFSA investors could consider now.
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Hydro One stock
Hydro One (TSX: H) is an attractive Canadian stock offering growth, income, and stability. Its regulated electricity transmission and distribution assets make it relatively immune to the risks associated with power generation and commodity price volatility. This structure ensures resilient, low-risk earnings and predictable cash flows, supporting its higher dividend payments.
Thanks to its regulated operations, this utility company has consistently delivered solid financials, resulting in above-average capital gains. For instance, Hydro One stock has grown at a compound annual growth rate (CAGR) of about 16% over the last five years, delivering capital gains of 109%. In addition, Hydro One has increased its dividend at a CAGR of 5% over the past 8 years, while offering a yield of approximately 2.7% at the current market price.
The company is well-positioned to deliver higher dividends and solid returns in the coming years. Its low-risk earnings and expanding rate base augur well for growth. Hydro One expects to grow its rate base at a CAGR of 6% through 2027, resulting in annual earnings growth of 6–8%. This will support higher dividend payments. Management projects a 6% increase in its yearly dividend during the same period.
Further, the hydro producer’s robust balance sheet, predictable earnings, and strong internally generated cash flows position it well to capitalize on growth opportunities. Its exposure to structural tailwinds such as rising electricity demand resulting from population growth and data centre expansion will likely drive its financials and share price.
Dollarama stock
Dollarama (TSX: DOL) is another compelling stock TFSA investors could consider adding to their portfolios. This leading discount-chain operator sells products at low and fixed price points. Its extensive range of consumable products and value pricing strategy consistently drives traffic and customer retention, leading to strong financials and supporting its share price.
Despite its defensive business model, the retailer has outperformed the broader market with its capital gains and has rewarded shareholders with higher cash returns. Over the past five years, Dollarama’s share price soared by over 292%, reflecting a CAGR of 31.4%. Further, it has raised its dividend 14 times since 2011.
Dollarama is poised to sustain its growth despite macro uncertainty. Its low pricing strategy, wide product range, and strong supply chain will continue to support revenue and earnings. Moreover, new store openings and international expansion will accelerate its growth, supporting dividend payments and share price.
