Investing in Canadian equities via a Tax-Free Savings Account (TFSA) helps your investments grow tax-free, whether that growth comes from capital gains, dividends, or both. Over time, this tax-free compounding can significantly boost the size of your portfolio.
As we move into 2026, Canadians will have a new TFSA contribution limit of $7,000. That amount provides a meaningful opportunity to pick up a handful of high-quality TSX-listed companies that can deliver reliable performance and solid long-term returns. The key is to focus on businesses with strong fundamentals, including companies that can remain resilient through economic cycles while still rewarding shareholders.
Diversifying your TFSA portfolio with strong, high-quality names can also lower overall risk while maintaining steady growth. With that strategy in mind, here are three TSX stocks you would want in your TFSA.
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TFSA stock #1: Dollarama
Dollarama (TSX:DOL) is one of the top Canadian stocks to add to your TFSA portfolio for growth, income, and stability. This discount retailer offers a broad mix of everyday essentials and general merchandise at low fixed price points. This value proposition strategy helps it to drive traffic in all market conditions, adding stability to its business.
Despite its defensive business model, Dollarama stock has grown at a compound annual growth rate (CAGR) of 30.6% in the last five years, generating capital gains of over 279%. Moreover, Dollarama has rewarded its shareholders by consistently increasing its dividend every year since 2011.
Looking ahead, the value retailer’s focus on expanding its store network across Canada and internationally, with low maintenance requirements and fast payback periods, augurs well for growth. Further, its growing presence on third-party delivery platforms will broaden customer access and convenience, unlocking new sales opportunities. The company is also poised to benefit from its direct sourcing, which strengthens its cost control and enhances its competitive edge. In short, Dollarama is well-positioned to deliver solid total returns.
TFSA stock #2: Hydro One
Hydro One (TSX:H) is another compelling stock to add to your TFSA. This utility company focuses on electricity transmission and distribution. Its defensive operating structure and regulated business model protect it from economic downturns and commodity price swings. Thanks to its growing regulated asset base, Hydro One consistently generates steady earnings and predictable cash flows. This supports both its share price and higher dividend payments.
For instance, the utility giant has raised its dividend for the past eight years. In addition, Hydro One stock has appreciated 110.5% over the past five years, reflecting a CAGR of 16.1%.
Looking ahead, Hydro One’s rate base is projected to grow by about 6% annually through 2027. This means earnings and dividends will likely rise in the coming years. Further, Hydro One is poised to benefit from its self-funded projects, thanks to its strong internally generated cash flows. With rising electricity demand, Hydro One is well-positioned to deliver low-risk earnings, steady income, and long-term growth.
TFSA stock #3: Shopify
Shopify (TSX:SHOP) is a no-brainer for your TFSA, with strong long-term growth potential. Over the past three years, shares of this e-commerce giant have surged more than 278.4%, reflecting a CAGR of 55.8%. The Canadian tech giant is benefitting from a secular shift toward digital and multichannel retail that shows no signs of slowing.
Shopify is no longer just a platform for online merchants. It is steadily broadening its revenue base and expanding deeper into retail ecosystems. By strengthening its offline retail offerings, moving into the fast-growing business-to-business (B2B) segment, and rolling out innovative tools powered by artificial intelligence, Shopify is positioning itself at the center of modern commerce. These investments are designed with sustainability in mind, as the company sharpens its focus on efficiency and profitability while scaling globally.
Shopify’s prospects remain solid. Digital adoption continues to accelerate, merchants are increasingly choosing Shopify to power their businesses, and the company keeps gaining share across retail channels. As gross merchandise volumes rise and the company delivers sustainable earnings, Shopify is poised to deliver strong returns.
