Growing your Tax-Free Savings Account (TFSA) does not require a ton of money. One of the most effective approaches is simply choosing the right kinds of investments and allowing time to do the heavy lifting. Even with a modest budget, investors can improve their long-term outcomes by focusing on quality TSX stocks.
Canadian growth stocks with strong fundamentals can be particularly attractive in this context. These are businesses that consistently expand their revenues and earnings at a solid pace. Value also plays an important role. For TFSA investors with a long-term mindset, value stocks present opportunities to buy solid businesses at a discount. Another effective approach is to look for companies that offer both growth and income. Over time, companies with these characteristics are more likely to deliver returns that outpace the broader market, making them well-suited for long-term wealth creation in a TFSA.
The TFSA structure further amplifies this opportunity. Because both capital gains and dividend income are completely tax-free, every dollar of return remains invested and continues to compound.
Against this background, here are three TSX stocks to enhance your TFSA portfolio’s returns.
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TFSA growth stock: Aritzia
Aritzia (TSX:ATZ) is a top Canadian growth stock to add to your TFSA portfolio. The fashion retailer has consistently delivered solid growth, driven by strong product demand, frequent new collections, a deeply loyal customer base, and the expansion of its physical and digital footprint.
Since fiscal 2020, Aritzia has posted double-digit growth in both revenue and earnings. Aritzia’s top line has increased at a compound annual growth rate (CAGR) of 23%, while earnings have grown at a 19% CAGR. Its strong operating performance has translated into strong shareholder returns, with the stock up about 365% over the past five years.
While the recent rally has stretched its valuations, Aritzia stock has further upside potential. Its expanding footprint and brand momentum are likely to accelerate its growth. Aritzia plans to expand its U.S. boutiques at a healthy pace. Moreover, its digital business is performing well. Although tariffs and logistics costs pose near-term challenges, operational efficiencies and supply-chain improvements should help protect margins, supporting the company’s growth in the long term.
TFSA value stock: MDA Space
MDA Space (TSX:MDA) offers significant value near the current price levels. Shares of this space technology company pulled back sharply after a major satellite order was cancelled. The headline spooked investors, but the underlying business remains intact, creating an entry point for long-term investors.
MDA is a leader in satellite systems, robotics, and geointelligence, markets supported by rising global data demand and increasing defence budgets. As space becomes a core national security priority and NATO renews its focus on space capabilities, MDA stands to benefit from long-term structural tailwinds.
Its strength in advanced satellite communications for broadband and 5G, along with growing demand for earth observation and robotics, supports future growth. A solid backlog and balance sheet further provide a solid platform for future growth.
TFSA growth and income stock: Hydro One
TFSA investors could add Hydro One (TSX:H) stock for stability, income, and growth. The company operates a regulated electricity transmission and distribution business, which helps insulate earnings from economic swings and commodity price volatility. As a result, Hydro One generates predictable cash flows that support both its share price and dividends.
Its steadily expanding rate base has driven consistent dividend growth, rising at about 5% annually from 2016 to 2022 and about 6% in recent years. With the rate base expected to grow roughly 6% per year through 2027, the company is expected to deliver steady earnings growth.
Moreover, expansion of transmission capacity, investments in grid modernization, and integration of renewable sources position Hydro One to benefit from increasing electricity demand and reward long-term investors with solid total returns.
