There’s a limit to how much money you can save and invest in your Tax-Free Savings Account (TFSA) each year. This year’s limit is $6,500. The idea of the TFSA is to get Canadians saving and investing regularly. If you started saving from the beginning of the year, you could contribute about $541 per month to arrive at $6,500 by the end of the year.
How do you go about turning your TFSA into a gold mine? You can invest in stocks with solid long-term growth potential. Here are a couple of top stocks that have outperformed the market in the long run.
Brookfield Corp.
Brookfield (TSX:BN) has been experiencing macro headwinds, including higher interest rates, which have been weighing on the stock. The cyclical stock is down meaningfully by about 15% from its high this year.
The business is complex. Its capital is deployed across its asset management business, insurance business, and its operating businesses, which own and operate real assets in renewable power & transition, infrastructure, private equity, real estate, and asset management.
Brookfield has a track record of delivering value to its long-term shareholders. It focuses on compounding capital to earn returns of north of 15% for its long-term shareholders. Buying the undervalued stock today could result in substantial wealth creation down the road.
At $43.37 per share at writing, the analyst consensus 12-month price target represents a worthwhile discount of approximately 27% or near-term upside potential of about 38%. However, the stock could continue to be weighed down in a recession, which economists expect to occur by 2024 in Canada and the United States. Moreover, it only pays a small dividend yield of about 0.9%.
Investors targeting outsized price appreciation over the next five years or beyond could consider Brookfield stock but be prepared to endure volatility.
For more reliable returns, you might hold one of its higher-yielding operating businesses, such as Brookfield Infrastructure Partners (TSX:BIP.UN).
Brookfield Infrastructure Partners
As you can see in the chart above, Brookfield Infrastructure Partners stock has been less volatile than Brookfield stock. Moreover, it offers a larger cash distribution yield of about 4.8%. So, it pays decently well for investors to wait for price appreciation. It generates diversified cash flows across quality utility, transport, midstream, and data infrastructure assets.
The global infrastructure company has demonstrated its ability to make strategic acquisitions, optimize acquired assets, and produce organic growth from its asset base. Furthermore, it targets returns of 12-15% on its investments, which could translate to funds from operations growth of about 10% per year. This would result in long-term stock price appreciation as well as support the increase of its cash distribution.
Brookfield Infrastructure Partners stock has also experienced a pullback, which makes it more attractive for income and long-term price gains. It’s down about 21% from its 52-week high. Going forward, the top utility stock targets cash-distribution growth of 5-9% per year.
At $42.49 per share at writing, the analyst consensus 12-month price target represents a considerable discount of approximately 29% or near-term upside potential of about 40%.
