A Tax-Free Savings Account (TFSA) is one of the most effective tools for building long-term wealth, allowing investors to earn tax-free returns on eligible investments within their contribution limits. However, TFSA investors should be selective when choosing stocks, as significant share price declines and subsequent sales can erode capital and reduce the cumulative contribution limit.
With that in mind, investors should focus on high-quality companies with strong fundamentals and attractive long-term growth prospects. Against this backdrop, here are three top Canadian stocks that could be excellent additions to a TFSA portfolio.
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Fortis
My first pick for a TFSA is Fortis (TSX:FTS), a regulated electric and natural gas utility that serves approximately 3.5 million customers across Canada, the United States, and the Caribbean. Thanks to its regulated asset base and low-risk transmission and distribution operations, the company generates stable, predictable earnings largely insulated from market volatility and broader economic fluctuations. In addition, Fortis has consistently expanded its asset base while improving operational efficiency, supporting steady growth in earnings and cash flows.
This reliability has translated into strong long-term shareholder returns. Over the last 20 years, Fortis has delivered a healthy average annual total shareholder return of 10.2%. The company is also a standout dividend payer, with 52 consecutive years of dividend growth. Its forward dividend yield currently stands at 3.3%, providing investors with a growing stream of passive income.
Looking ahead, Fortis remains well-positioned for continued growth. The company is advancing its $28.8 billion capital investment program, which could expand its rate base to $57.9 billion by 2030, representing annualized growth of 7%. These investments should support steady earnings and cash flow growth in the coming years. Reflecting this confidence, management expects to increase the dividend by 4% to 6% annually through the end of the decade. Given its defensive business model, consistent dividend growth, and long-term expansion opportunities, Fortis is an excellent stock to hold in a TFSA.
TC Energy
TC Energy (TSX:TRP) is my second pick. The North American energy infrastructure company transports nearly 30% of the natural gas consumed across the continent. It also operates a diversified portfolio of power-generation assets totaling 4.7 gigawatts of capacity. Importantly, it generates approximately 98% of its earnings from rate-regulated assets and long-term take-or-pay contracts, making its financial performance highly predictable and less vulnerable to economic cycles and market volatility.
This stable business model has enabled TC Energy to generate reliable cash flows and consistently reward shareholders. The company has increased its dividend for the last 26 years, while its forward dividend yield currently stands at 3.7%.
Looking ahead, growing natural gas production and consumption across North America continue to create meaningful long-term growth opportunities for the company. To capitalize on this favourable environment, TC Energy plans to invest around $6 billion annually through the remainder of the decade to expand and strengthen its infrastructure network. These investments could support steady financial growth, with management forecasting adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) growth of 3–5% annually through 2028. Given its stable cash flows, disciplined growth strategy, and strong dividend track record, TC Energy is well-positioned to deliver attractive long-term returns within a TFSA.
Hydro One
My final pick for a TFSA is Hydro One (TSX:H), a pure-play electricity transmission and distribution utility with no direct exposure to power generation. With approximately 99% of its business rate-regulated, the company’s earnings are largely insulated from commodity price fluctuations and broader market volatility, enabling it to generate stable, predictable financial results across a wide range of economic environments.
This regulated business model has translated into impressive shareholder returns. Over the last five years, Hydro One has delivered an average annual total shareholder return of 16.3%. The company has also established a solid track record of dividend growth, increasing its dividend in each of the past nine years. It currently offers a forward dividend yield of 2.5%, providing investors with a growing source of passive income.
Looking ahead, Hydro One remains well-positioned for continued growth. The utility currently has 15 transmission projects in various stages of development and construction, which should expand its regulated asset base and support future earnings growth. In addition, rising population levels and ongoing residential development across its service territories could drive increased demand for electricity distribution services.
Given its highly regulated operations, resilient earnings profile, and attractive long-term growth opportunities, Hydro One appears well-positioned to continue improving its financial performance and shareholder returns, making it an excellent addition to a TFSA focused on long-term wealth creation.
