Although this year has been strong for Canadian equity markets, with the benchmark S&P/TSX Composite Index gaining roughly 30% and concerns around ongoing geopolitical tensions, the potential for an artificial intelligence (AI) bubble and elevated valuations remain. As a result, investors should be cautious when deploying capital through their tax-free savings accounts (TFSAs), as market downturns and subsequent selling can not only erode capital but also permanently reduce TFSA contribution room.
Against this backdrop, here are two Canadian stocks that I believe are well-suited for inclusion in a TFSA right now.
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Enbridge
Enbridge (TSX: ENB) stands out as a compelling Canadian stock for inclusion in a TFSA, supported by reliable financial performance driven by its regulated asset base and long-term, take-or-pay contracts. The diversified energy company operates an extensive pipeline network transporting crude oil and natural gas, three natural gas utility assets in the United States, and renewable energy projects. Notably, Enbridge earns approximately 98% of its adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) from regulated assets and long-term contracts, helping insulate its financial results from market volatility.
Backed by these stable cash flows, Enbridge has paid dividends for 70 consecutive years and increased its dividend for 31 straight years, currently offering an attractive forward dividend yield of 6%. Looking ahead, the company is advancing its $37 billion secured capital program, with projects expected to enter service over the next four years. In addition to these expansions, higher asset utilization and continued system optimization should further strengthen earnings.
With these growth initiatives in place, management expects to return $40–$45 billion to shareholders over the next five years. Considering its regulated asset base, strong growth outlook, and attractive yield, Enbridge appears to be an ideal addition to a TFSA portfolio.
Hydro One
Another reliable stock that I believe is well-suited for a TFSA is Hydro One (TSX: H), a pure-play electricity transmission and distribution company with no exposure to power generation or commodity price fluctuations. Approximately 99% of its operations are rate-regulated, making its financial performance less sensitive to market volatility and economic cycles and enabling it to deliver stable, predictable results. Since 2017, Hydro One has grown its rate base at a compound annual growth rate (CAGR) of 5.1%, supporting steady financial growth. On the back of this performance, the stock has delivered total returns of more than 118% over the past five years, representing an annualized return of 18.8%.
Looking ahead, electricity demand is expected to rise, driven by economic growth, the electrification of transportation, and increased investment in AI-ready data centres. To capitalize on these trends, Hydro One is actively expanding its asset base through an $11.8 billion capital investment plan, which could grow its rate base at approximately 6% per year to $32.1 billion by 2027. Supported by these investments, management expects earnings per share to grow at a 6–8% CAGR through 2027, enabling dividend growth of around 6% annually.
Hydro One has increased its dividend at a CAGR of 5.3% since 2017, while its forward dividend yield stands at 2.5%. Considering its regulated business model, visible growth trajectory, and reliable income stream, Hydro One appears to be an excellent addition to a TFSA portfolio.
