If you’re unfamiliar with the Tax-Free Savings Account (TFSA), the reason it gets so much hype among Canadian investors is that it’s the most powerful tool that we have at our disposal. When you buy Canadian stocks in your TFSA, every dollar of capital gains and dividend income that you earn is tax-free.
Taxes are by far the biggest drag on your portfolio’s ability to compound. So, when you keep every dollar you earn, and your TFSA starts to grow and compound each year considerably, it creates a massive snowball effect.
That’s why it’s essential to ensure the stocks that you buy for your TFSA are the best businesses in Canada. It’s also essential to ensure you’re buying stocks to hold for the long haul.
If you’re constantly trying to trade in and out of positions or holding low-growth assets in your TFSA, you’re not fully taking advantage of the account’s power. The real opportunity created by the TFSA comes from owning high-quality businesses that can grow earnings, increase dividends, and appreciate in value consistently for decades.
So, with that in mind, if you’ve got cash that you’re looking to put to work today, here are four of the best Canadian stocks to buy and hold forever in a TFSA.
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Two of the best Canadian growth stocks to buy in a TFSA
There’s no question that growth stocks are some of the best investments to buy in your TFSA because of the significant long-term potential they offer.
That’s why two of the best Canadian stocks to buy now and hold forever in your TFSA are goeasy (TSX: GSY) and Alimentation Couche-Tard (TSX: ATD).
goeasy is, without a doubt, one of the best long-term growth stocks on the TSX. The company operates in the alternative lending space, providing credit solutions to Canadians who may not qualify at traditional banks.
It has grown revenue and earnings at an impressive pace for years, driven by disciplined underwriting and consistent loan portfolio expansion. Even during tougher economic environments, goeasy has proven it can manage risk while continuing to grow.
In fact, in just the last five years, its normalized earnings per share increased at an incredible compound annual growth rate of 26.4%. Furthermore, the stock has increased its dividend by roughly 120% over that five-year stretch.
So, with goeasy trading unbelievably cheap in today’s environment as it faces temporary headwinds, not only is it one of the cheapest growth stocks to buy for your TFSA, but it also offers a current yield of roughly 5.3%.
Meanwhile, Alimentation Couche-Tard is one of the best Canadian growth stocks to buy in your TFSA as it operates a global network of convenience stores and fuel stations that generate steady cash flow from everyday purchases.
Its scale, disciplined capital allocation, and history of successful acquisitions have allowed it to grow earnings consistently over the long haul. In fact, over the last decade Couche-Tard has earned investors a total return of roughly 190%.
So, if you’re looking for reliable growth Canadian growth stocks to buy in your TFSA, these two picks are certainly two of the best.
Two top-notch dividend stocks for passive income seekers
High-quality dividend stocks can also make a lot of sense in your TFSA, especially for investors closer to retirement or who prefer income-generating stocks.
And while the TSX has several high-quality dividend stocks to consider, two of the best to buy in your TFSA today are BCE (TSX: BCE) and CT REIT (TSX: CRT.UN).
BCE is a classic Canadian dividend stock that fits perfectly inside a TFSA since it consistently generates recurring revenue.
Furthermore, because telecom stocks own long-life assets and provide essential services, these stocks are cash cows you can have confidence owning for the long haul.
Plus, right now with BCE still trading cheaply, it offers investors an attractive yield of roughly 5%.
Meanwhile, CT REIT is another top pick for investors focused on dependable income.
The REIT owns retail properties across Canada, with the vast majority leased to Canadian Tire, which is also its majority shareholder. That relationship creates stable, long-term rental income, which allows CT REIT to pay a growing dividend with a current yield of roughly 5.5%.
So, if you’re a dividend investor looking for top Canadian stocks to buy in your TFSA, CT REIT and BCE are undoubtedly two of the best.
