After an impressive run over the last few months, the Canadian equity markets have turned volatile amid easing metal prices and the appointment of Kevin Warsh – widely perceived as a hawkish policymaker – as the new Federal Reserve chair. Additionally, ongoing geopolitical tensions and the negative impact of protectionist policies on global economic growth are cause for concern.
Amid these uncertainties, investors need to be cautious when investing through their Tax-Free Savings Accounts (TFSA), as declines in stock prices and subsequent selling would not only lead to capital erosion but also a lower investor TFSA contribution limit. Against this backdrop, here are my three top picks for your TFSA.
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Dollarama
Dollarama (TSX:DOL), a leading Canadian discount retailer, has adopted a highly efficient direct sourcing model, eliminating intermediary costs and strengthening its bargaining power. Combined with its streamlined logistics network, this model has helped reduce operating costs, enabling the company to offer a wide range of consumer products at attractive price points. Supported by its compelling value proposition, the retailer continues to deliver healthy same-store sales regardless of the broader macroeconomic environment.
Moreover, the Montreal-based retailer is steadily expanding its footprint in both Canada and Australia. It plans to increase its Canadian store count from 1,684 to 2,000 and its Australian store base from 401 to 700 by the end of fiscal 2034. Given Dollarama’s capital-efficient business model, rapid sales ramp-up, short payback periods, and relatively low maintenance capital expenditure requirements, these expansions are well-positioned to drive meaningful growth in both revenue and earnings.
In addition, Dollarama owns a 60.1% stake in Dollarcity, which operates 683 stores across five Latin American countries. Dollarcity is also pursuing an aggressive expansion strategy, with plans to increase its store count to 1,050 by the end of fiscal 2031. Dollarama also holds an option to raise its stake in Dollarcity to 70% by the end of next year. Given its strong financial performance and multiple growth avenues, I believe Dollarama would be an ideal addition to your TFSA.
Fortis
Second on my list is Fortis (TSX:FTS), which serves more than 3.5 million customers across the United States, Canada, and the Caribbean. The utility operates nine regulated electric and natural gas businesses, with most assets in low-risk transmission and distribution. Its regulated asset base makes earnings less sensitive to market volatility, helping Fortis deliver an average annual total shareholder return of 9.7% over the past 20 years. The company also boasts a 52-year streak of dividend growth and currently offers a forward yield of 3.6%.
Moreover, Fortis is advancing a $28.8 billion five-year capital investment program, expected to grow its rate base at an annualized rate of 7% to $57.9 billion by 2030. Combined with operational efficiency initiatives, preventive maintenance, and energy transition investments that generate fuel savings, these projects should support steady earnings growth. With management targeting 4–6% annual dividend growth through the rest of the decade, Fortis remains an excellent TFSA addition.
Waste Connections
Waste Connections (TSX:WCN), a leading solid waste management company, has delivered an impressive 18.4% annualized return over the past decade. Operating primarily in secondary and exclusive markets, the Toronto-based company faces limited competition and benefits from higher margins. It has expanded its footprint through organic growth and strategic acquisitions, completing over 100 deals since 2020 that added roughly $2.2 billion in annualized revenue.
Supported by strong cash flows and a solid balance sheet, management plans to maintain its active acquisition strategy. It has a healthy acquisition pipeline of private companies in the United States that can contribute $5 billion to its annualized revenue. In addition, investments in technologies such as robotics and optical sorting at recycling facilities, along with improved employee engagement and safety metrics, could further expand margins. Given these strengths, I believe Waste Connections is well-positioned to deliver superior returns regardless of broader market conditions.
