If you’re like many Canadian investors with too much cash sitting in a TFSA account and too few investments, it’s easy to correct that. Of course, waiting for the next big market purge might be the move for some of the more cautious investors out there who fear buying at a peak and riding the correction all the way to depths not seen in some number of quarters or even years. Indeed, the fear of a correction or bear market is real.
But, at the end of the day, many TFSA investors might be less afraid of the stock market and unaware that the TFSA can serve as a long-term compounding vehicle for higher-reward, though risky, kinds of assets. Indeed, with inflation as high as it is, cash and even GICs, which are offering lower rates than just over two years ago, perhaps defensive dividend stocks and diversified ETFs are the way to go for investors who don’t see themselves touching the TFSA funds for years, or even decades, to come.
So, if you’ve got $21,000 or so that you’ve been meaning to put to work, then good job for contributing, especially amid today’s questionable economic climate. The next step, though, is picking the right kinds of stocks to help your TFSA get off to the races as it swells and helps fund a retirement in the many decades down the road.
Of course, I wouldn’t put all of one’s TFSA proceeds into one stock at one instance. That is, unless you’re a seasoned investor who’s willing to put more eggs in one basket that you watch really closely. For newer investors, though, I think diversification is a better move, especially if you might be prone to hitting the panic button when markets do start nosediving. In today’s red-hot market, it feels like stocks only go up, but they can go down, and they tend to take the elevator when the time comes.
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Couche-Tard
Instead of seeking to avoid such an inevitability, it makes more sense to be prepared with a plan in place. For some, that means dollar-cost averaging, or buying more stock at lower prices on the way down.
For others, it simply means doing nothing. If there’s one dividend payer that looks enticing right here, it has to be Alimentation Couche-Tard (TSX: ATD), while its dividend yield is hovering close to 1%. It’s not a massive yield, but Couche-Tard has the growth engine to keep the double-digit percentage dividend hikes coming each and every year.
While Couche-Tard might be a boring convenience retail and fuel station to some, I’m more inclined to view it as a well-run business with multiple growth levers that it can pull as it makes the most of its pristine balance sheet. It has a rich history of building massive synergies via M&A. But what’s more, it has proven it can grow without relying on acquisitions.
That’s vital when the costs of borrowing are higher. In any case, Couche-Tard’s underrated innovation prowess could be key as it drives organic growth while keeping potential deals on the radar.
Whether it’s frictionless checkout (check out the Couche-Tard Connecté store concept, which relies on self-checkout), better hot food, or just affordable options in today’s harsh economic environment, the firm is a rare high-growth consumer staple that, in my opinion, is worth well more than the 18.9 times trailing price-to-earnings (P/E) that shares are currently commanding. While I wouldn’t stash a massive sum in one go, I would stash it atop my radar this July.
