TFSA Investors: 2 Stocks You Should Buy in 2021

TFSA stocks like Topicus.com (TSXV:TOI) should be on your radar in 2021.

| More on:

Canadians can deploy another $6,000 into their Tax-Free Savings Account (TFSA) this year. Luckily, stocks have been declining for the past few months, which means some bargain opportunities have emerged. 

Here are the top two stocks I believe you should keep an eye on for 2021. 

TFSA stock 1

Suncor Energy (TSX:SU)(NYSE:SU) is a top pick for 2021. The oil and gas giant should see a spike in its underlying commodity. As the global economy reopens, analysts are expecting fuel sales to skyrocket. The higher price of crude oil should enhance Suncor’s top line. 

Over the past year, the company has switched its attention to high-margin products and its long-life and integrated assets. That should translate to better margins and stronger cash flows in the second-half of 2021. 

Meanwhile, investors haven’t fully priced this into the stock. Although the stock is up 74% over the past year, it’s still trading at 1.2 times book value per share and 1.7 times sales per share. 

Suncor stock offers a 3.2% dividend yield and management is actively buying back its shares. This undervalued stock should be on your TFSA watch list. 

TFSA stock 2

Topicus.com (TSXV:TOI) is another TFSA stock that deserves your attention. Most investors may have never heard of this little-known company, but they’re probably aware of its former parent: Constellation Software.

Topicus was Constellation’s European subsidiary. It focuses on acquiring niche software companies across the continent and was spun off earlier this year as Constellation shifts its focus to new avenues of growth. 

The company’s existing portfolio of software platforms serves 100,000+ customers in 14 countries. Over the past year, Topicus expanded revenues, net income, and free cash flow by 18%, 37%,  and 25%. As you can see, the free cash flow and net income growth rates are close to our threshold of 26% compound annual growth rate (CAGR). If the company can sustain this pace over the next decade, investors should be in for a windfall. 

What’s more encouraging is the fact that Europe’s software market is untapped and undervalued. Local software companies are just as innovative as their American counterparts, but tend to attract less capital. This creates a unique opportunity for companies like Topicus to swoop in and snatch deals at bargains. 

In other words, Topicus could replicate Constellation’s success over the next decade. That’s why this TFSA stock should be on your radar. 

Bottom line

Over the past year, growth stocks have had an incredible run. However, this pace of growth cannot be sustained. Investment returns are usually drawn out over many years, if not decades, and it looks like we’re entering a slower pace of growth in the stock market.

That means investors should temper their expectations and aim for companies that are more robust and stable. Companies like Suncor and Topicus have intrinsic factors that make them very attractive TFSA stocks for 2021.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Vishesh Raisinghani has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Topicus.Com Inc.

More on Dividend Stocks

TFSA (Tax-Free Savings Account) on wooden blocks and Canadian one hundred dollar bills.
Dividend Stocks

Where to Invest Your $7,000 TFSA Contribution

The TFSA is attractive for investors who want to generate tax-free passive income.

Read more »

The TFSA is a powerful savings vehicle for Canadians who are saving for retirement.
Dividend Stocks

TFSA Investors: 3 Dividend Stocks Worth Holding Forever

These TSX stocks have the potential to grow their dividends over the next decade, making them top investments for TFSA…

Read more »

Tractor spraying a field of wheat
Dividend Stocks

Is Nutrien Stock a Buy for its Dividend Yield?

Nutrien is down more than 50% form the 2022 highs. Is NTR stock now oversold?

Read more »

golden sunset in crude oil refinery with pipeline system
Dividend Stocks

Best Stock to Buy Right Now: Enbridge vs TC Energy?

Enbridge and TC Energy rebounded nicely over the past year. Are more gains on the way?

Read more »

Electricity transmission towers with orange glowing wires against night sky
Dividend Stocks

2 Utility Stocks That Are Smart Buys for Canadians in November

Are you looking for some of the smart buys to consider in November? These utility stocks offer growth and a…

Read more »

View of high rise corporate buildings in the financial district of Toronto, Canada
Dividend Stocks

Is Power Corporation of Canada Stock a Buy for its 5% Dividend Yield?

Is Power Corporation of Canada (TSX:POW) stock's 5% dividend yield worth it? Discover why this resilient stock could be a…

Read more »

hand stacks coins
Dividend Stocks

Here Are My Top 3 Dividend Stocks to Buy Now

These three dividend stocks are ideal for strengthening your portfolio and earning a stable passive income.

Read more »

man touches brain to show a good idea
Dividend Stocks

3 No-Brainer REIT Stocks to Buy Right Now for Less Than $200

REITs have long been touted as some of the best dividend stocks out there if you want recurring, strong income.…

Read more »