When it comes to investing, the Tax-Free Savings Account (TFSA) is one of the best, most popular, and most important tools Canadians have to grow their money.
Unlike any other account, the TFSA lets you invest, grow, and withdraw your money completely tax-free. That means every dollar of gains you make, every dividend you earn, and every time your capital compounds, all that money stays in your pocket.
This matters because taxes can significantly eat into your returns. Therefore, since you don’t pay taxes in a TFSA, you want to diversify your capital with stocks that have the best potential to grow your wealth over time.
That doesn’t mean risky penny stocks, because once you lose your contribution room, it’s gone. Instead, the best stocks to buy in your TFSA to supercharge your tax-free growth are top-notch growth or dividend-growth stocks that can steadily compound for decades.
It’s essential to understand that while finding stocks which can grow at an attractive pace is paramount, it’s even more crucial to find ones that can grow consistently over the long term, regardless of how the economy is performing.
Those are the types of businesses that will help your capital compound the fastest inside your TFSA. So, with that in mind, here are three Canadian stocks that I think are perfect for long-term, tax-free growth.
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A top industrial REIT to buy in your TFSA today
There’s no question that the real estate sector is a great place to look for stocks that combine steady income with reliable long-term growth.
And while there are a few top-notch REITs you could consider, one of the very best is Granite REIT (TSX:GRT.UN).
Granite owns a massive portfolio of industrial and logistics properties across North America and Europe. These are the types of properties that have seen a huge surge in demand over the past decade as e-commerce continues to grow and logistics become increasingly important for businesses.
Therefore, Granite not only generates significant cash flow, but it has also been growing its revenue rapidly in recent years.
For example, over the last five years, its revenue has increased at a compound annual growth rate (CAGR) of 15.8%, while its adjusted funds from operations (AFFO) have grown at a CAGR of 12.1%.
Plus, in addition to its impressive growth potential, Granite also pays a reliable and steadily growing dividend. Over the past five years, it has increased its annual dividend, which it pays monthly, from $3.00 to $3.40.
And while analysts expect Granite to grow its AFFO per share by another 5% this year, even using last year’s AFFO per share of $4.86, its payout ratio would still be 70%, showing just how sustainable its dividend truly is. Plus, on top of the growth and sustainability of the dividend, the REIT’s current dividend yield, sitting at 4.3%, is also quite compelling.
So, if you’re looking for a top-notch Canadian stock to help supercharge your TFSA’s growth, there’s no question Granite is one of the best.
Two of the best defensive growth stocks on the market
In addition to Granite, two more of the best stocks to buy in your TFSA are Dollarama (TSX:DOL) and Thomson Reuters (TSX:TRI), some of the best defensive growth stocks on the TSX.
Stocks that can grow their earnings at an impressive pace while maintaining steady, reliable operations year over year are exactly what you want to buy in your TFSA for consistent long-term returns.
Dollarama, in particular, stands out because it can perform well in any market environment. It grows rapidly when the economy is strong, but often sees even more growth during tougher times, as consumers look to stretch their budgets by shopping at discount retailers.
Meanwhile, Thomson Reuters is a great pick because it provides data, software, and analytics services to essential industries such as legal, tax, accounting, and finance. Plus, the majority of its revenue comes from recurring subscriptions, which helps stabilize its earnings and makes the business even more defensive.
And right now, with Dollarama trading off its 52-week high and Thomson Reuters down nearly 25% from its high, there’s no question that these are two of the best stocks you can buy to help supercharge your TFSA today.
