Because all investment income earned inside a Tax-Free Savings Account (TFSA) is sheltered from tax, it’s one of the most powerful wealth-building tools available to Canadian investors.
To make the most of this advantage, it makes sense to prioritize assets with strong long-term return potential. Historically, stocks have outperformed other asset classes over extended periods, making high-quality stocks an ideal fit for a TFSA.
Here are three compelling stocks — spanning growth and income — that Canadian investors may want to consider right now.
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A global growth compounder: Mastercard
One of the best growth stocks to hold in a TFSA is Mastercard (NYSE:MA). The company operates a powerful global payments network supported by strong brand recognition, significant scale, and high barriers to entry. Its franchise-based business model generates recurring revenue by connecting millions of merchants, banks, and consumers worldwide.
Beyond its core payments business, Mastercard continues to invest heavily in innovation. Its expanding use of artificial intelligence (AI), advanced data analytics, and value-added services — such as fraud detection and cybersecurity — enhances transaction security and customer trust while opening new revenue streams. These characteristics help the company compound earnings over time, which is exactly what TFSA investors should look for.
The stock has pulled back roughly 10% from its 52-week highs. At around US$539 per share at the time of writing, it trades at about 19% below the analyst consensus price target, suggesting near-term upside potential of roughly 23%.
On valuation metrics such as price-to-earnings (P/E), price-to-cash-flow, and price-to-free-cash-flow, the stock appears fairly valued or even discounted by 12–14%. Mastercard also regularly raises its dividend at a double-digit pace, adding to its long-term appeal.
Canadian investors can also buy Mastercard via its Canadian Depositary Receipt (CDR) on the TSX. This option allows investors to purchase the stock in Canadian dollars with built-in currency hedging and fractional ownership.
A Canadian tech leader at a discount: Constellation Software
For investors willing to tolerate volatility in exchange for growth potential, they can investigate Constellation Software (TSX:CSU). The Canadian software giant has experienced a significant sell-off, which may present an attractive long-term entry point.
The correction stemmed from concerns over slowing organic growth, softer enterprise spending, the disruptive potential of AI, and the unexpected resignation of founder Mark Leonard. These factors created uncertainty around leadership and strategy, even though the company’s underlying acquisition-driven model remains intact.
At approximately $2,845 per share, Constellation Software trades at more than a 40% discount to the analyst consensus price target, implying potential near-term upside of nearly 69%.
If management can continue growing earnings and cash flow at double-digit rates, today’s valuation could look very compelling in hindsight — an ideal setup for patient TFSA investors.
Reliable income and growth: Brookfield Infrastructure Partners
Investors seeking income alongside growth may want to consider Brookfield Infrastructure Partners L.P. (TSX: BIP.UN), especially on dips. The company owns and operates a globally diversified portfolio of infrastructure assets that generate stable cash flows with inflation largely built in. Its strategy combines organic growth, operational improvements, and disciplined capital recycling.
At around $48 per unit, Brookfield Infrastructure offers a cash distribution yield of roughly 4.8% and is committed to increasing that distribution by at least 5% annually. Holding a reliable income generator like this inside a TFSA allows investors to compound tax-free distributions over time.
Investor takeaway
A TFSA is best used to hold high-quality stocks with strong growth or income potential. Mastercard offers global scale and long-term compounding, Constellation Software provides discounted Canadian tech exposure with upside, and Brookfield Infrastructure delivers reliable, growing income. Together, these stocks highlight how Canadian investors can thoughtfully maximize TFSA returns over the long run.
