A Smart TFSA Portfolio for 2026: 3 Stocks I’d Buy Now

Here are three high-quality TSX stocks that you can buy and hold in a TFSA for massive long-term returns.

Key Points
  • Middle‑East tensions have driven energy prices and market volatility, but long‑term TFSA investors with contribution room can still find opportunities to deploy capital.
  • Three TFSA‑friendly TSX picks: Dollarama (DOL) — recession‑resilient discount retailer; Fortis (FTS) — regulated utility with 50+ years of dividend growth (~3.34%); Hydro One (H) — Ontario transmission utility with rate‑regulated, stable cash flows (~2.28%).
  • Foolish takeaway: holding these defensive, dividend‑paying stocks in a TFSA can provide tax‑free income and stability to help weather market turbulence.

Despite erratic enforcement of blockades and contradicting operations in the Strait of Hormuz, the fragile ceasefire between the US and Iran seems to be holding. Yet, the ongoing geopolitical tensions continue pushing oil and natural gas prices higher. Energy costs are considered one of the biggest causes of inflationary pressures, and that is what global economies are facing right now.

This kind of volatile market does not provide the ideal conditions in which most stock market investors might want to put their money to work. However, for those with a long investment horizon and contribution room available in their Tax-Free Savings Accounts (TFSAs), there might be a way to make the most of the market conditions.

Today, I will discuss three smart TSX stocks you can buy and hold in a TFSA, even in today’s market environment.

diversification is an important part of building a stable portfolio

Source: Getty Images

Dollarama

Dollarama Inc. (TSX: DOL) is my top pick when I think of retail stocks. It is a unique growth stock that relies on a defensive business model to give itself the qualities of a growth stock. The $47.6 billion market-cap giant is Canada’s largest operator of discount stores, providing consumers an assortment of general merchandise, seasonal items, and everyday consumable products at fixed lower price points.

Dollarama’s business model enables it to generate healthy revenue in any market cycle, especially when people have reduced buying power. When people look to cut costs, discount retailers like Dollarama offer the relief they seek. While not immune to market downturns, it has a business model that gives it the best chance at success in a volatile market. The discount retailer can be a good addition to your TFSA portfolio.

Fortis

Fortis Inc. (TSX: FTS) is a mainstay in many stock market investment portfolios for many reasons. It is one of the most boring stocks you can own in terms of capital gains. Where it lacks in providing significant capital gains, Fortis makes up for it with reliable, virtually guaranteed, and growing shareholder dividends.

Fortis generates revenue through several utility businesses across Canada, the US, and the Caribbean. Almost its entire revenue comes from long-term contracted assets in these regulated markets. The essential nature of its services and its rock-solid business model have allowed Fortis to pay investors dividends regularly and boast an over 50-year dividend-growth streak. Boasting a 3.3% dividend yield as of this writing, it can be an excellent holding to consider for your TFSA.

Hydro One

Hydro One Ltd. (TSX: H) is a utility stock like Fortis, but it has a different business model. Hydro One provides electricity transmission and distribution. However, the company does not engage in the actual production of the energy, giving it a buffer against volatile commodity prices. With almost its entire operations rate-regulated, it generates stable cash flows protected from the impact of weakness in the broader economy.

Being the foremost electricity transmission business in the province of Ontario, it has been expanding its grid to reach more customers and further increase its revenue. As of this writing, Hydro One stock trades for $58.52 per share and pays investors $0.3331 per share each quarter, translating to a 2.3% dividend yield.

Foolish takeaway

There’s no telling how the markets will move on any given day due to the volatile nature of the conflict in the Middle East. However, stock markets are cyclical in nature. When the dust settles, some TSX stocks will recover to better valuations far more easily than others and provide investors with more reliable returns amid the chaos. To this end, these three TSX stocks can fit the bill for your self-directed TFSA portfolio.

Fool contributor Adam Othman has no position in any of the stocks mentioned. The Motley Fool recommends Dollarama and Fortis. The Motley Fool has a disclosure policy.

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