Holding investments within a Tax-Free Savings Account (TFSA) allows investors to earn capital gains and dividend income without paying tax on those returns. Over time, this tax advantage can meaningfully impact portfolio growth. With $21,000 available to invest, an investor has a solid starting point for creating a diversified portfolio focused on long-term wealth creation.
The best approach is to buy and hold fundamentally strong Canadian companies with attractive prospects for future growth. At the same time, including a few reliable dividend-paying stocks can provide additional stability while supporting overall portfolio returns.
Against this backdrop, here are the best TSX stocks Canadian investors could consider adding to their TFSA portfolios for solid total returns.
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Best TFSA stock #1: Canadian Natural Resources
Canadian Natural Resources (TSX: CNQ) is a solid stock to add to a TFSA for growth and income. The Canadian energy producer has a strong record of returning capital to shareholders through steadily increasing dividend payments. Moreover, its stock has also delivered impressive capital gains over the past several years, outperforming the broader market.
Earlier this year, Canadian Natural raised its annualized dividend to $2.50 per share, extending its dividend-growth streak to 26 consecutive years. During that period, CNQ’s dividend has grown at a compound annual growth rate (CAGR) of approximately 20%.
CNQ has also produced substantial share price appreciation, with the stock gaining roughly 73.5% over the past year. Over the last five years, it has delivered a CAGR of about 34.5%, significantly exceeding the broader market.
Canadian Natural’s portfolio of long-life, low-decline oil and gas assets drives its production and free cash flow. Management’s focus on reducing debt and pursuing strategically beneficial acquisitions also bodes well for growth.
CNQ also has a considerable base of proved reserves, along with a large inventory of undeveloped resources. This should help Canadian Natural to sustain and expand production and cash flow over the long term.
Overall, CNQ offers dividend growth and solid capital gains, making it a compelling long-term holding for a TFSA.
Best TFSA stock #2: Brookfield Infrastructure Partners
Brookfield Infrastructure Partners (TSX: BIP.UN) is a top TSX stock for generating solid total returns. Its portfolio spans essential infrastructure, including utilities, transportation, midstream energy, and digital assets. Many of these businesses operate under long-term contracts or regulated arrangements, which helps produce steady and predictable cash flow.
Thanks to its defensive operating structure and solid demand across its businesses, Brookfield Infrastructure has grown its funds from operations (FFO) at a solid double-digit rate since 2009. Approximately 85% of FFO comes from contracted or regulated operations, while a substantial portion is either protected against inflation or linked to inflation through contractual mechanisms.
Brookfield Infrastructure has increased its distribution for 17 consecutive years and currently targets annual distribution growth of approximately 5% to 9%. Its payout ratio of 60% to 70% is relatively balanced, allowing the company to return cash to investors while retaining sufficient funds to reinvest in its existing assets and pursue new infrastructure projects.
There are plenty of growth opportunities ahead, too. The rapid expansion of AI data centres is driving demand for electricity and digital infrastructure. At the same time, continued investment in energy and transportation should create additional opportunities.
Overall, Brookfield Infrastructure offers a compelling combination of reliable income, steady growth, and exposure to long-term infrastructure trends.
