If you wish to live with financial freedom after retirement, investing your TFSA (Tax-Free Savings Account) money into the Canadian stock market could help you achieve that. But to expect high returns on investments, you must carefully pick stocks for your TFSA by avoiding fundamentally weak companies. This way, you can not only expect outstanding returns on your investments but also avoid unnecessary risks to your portfolio.
In this article, I’ll highlight two high-potential retirement stocks you can buy right now to maximize your TFSA returns in the long term.
Aritzia stock
Aritzia (TSX:ATZ) is my first Canadian stock pick for investors seeking to maximize their TFSA returns for a worry-free retirement. It’s a Vancouver-headquartered, vertically integrated design house and apparel retailer with a market cap of $4.1 billion.
After rallying by more than 300% in the previous four years, ATZ stock has seen a downside correction in the last couple of years due partly to macroeconomic challenges. With this, it currently trades at $37.05 per share with nearly 22% year-to-date losses.
In its fiscal year 2023 (ended in February), Aritzia’s revenue rose 46.9% YoY (year over year) to $2.2 billion. While its sales in its home market rose 31.3% YoY for the year, its United States market sales jumped 65.8%, reflecting continued strong momentum in the demand for its products. This drove the company’s adjusted yearly earnings up by 21.6% to $1.86 per share. Moreover, its e-commerce segment performance saw a notable 36.4% YoY increase last fiscal year.
Despite these positive factors, ATZ stock hasn’t seen much appreciation lately, making it look undervalued to buy for the long term.
Magna International stock
When you’re investing your hard-earned TFSA money in stocks for retirement planning, you should ideally focus on diversifying your portfolio by including stocks from various sectors and industries to it.
Keeping that in mind, Magna International (TSX:MG) is my second top retirement stock pick for TFSA investors right now. This Toronto-headquartered auto parts and mobility giant currently has a market cap of $21.5 billion, as its stock trades at $75.03 per share with minor 1.4% year-to-date gains.
In 2022, Magna’s total revenue rose 4% YoY to $37.8 billion, despite facing a tough macroeconomic environment. However, its adjusted earnings for the year declined by 20% YoY to $4.10 per share.
While global supply chain disruptions and consistent inflationary pressures took a toll on earnings growth last year, its long-term outlook remains strong as it continues to focus on futuristic mobility trends related to autonomous and electric vehicles. This long-term focus, higher organic sales, and improving global light vehicle production in 2023 could be some of the key reasons why Magna expects its EBIT (earnings before interest and taxes) margin to expand this year.
Overall, Magna’s geographically well-diversified business presence, robust balance sheet, and long track record of delivering strong returns to its shareholders make it a great stock for TFSA investors. Besides these positive factors, MG stock also offers a decent annualized dividend yield of 3.3% at the current market price, which can help you earn passive income.
