Unlocking the Power of the FHSA: The Top 2 Stocks to Fuel Your Home Savings

Canadians who just opened an FHSA can power their home savings with top stocks like Tricon Residential Inc. (TSX:TCN) in 2023.

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According to a recent Statistics Canada report, home ownership rates declined across all provinces and territories in Canada, except the Northwest Territories, from 2011 to 2021. Canada’s home ownership rate was 69% in 2011 and fell to 66.5% in 2021. Ontario, Canada’s most populous province, saw home ownership rates fall from 71.4% in 2011 to 68.4% by the end of the forecast period. The federal government has sought solutions to encourage home ownership as more Canadians are struggling to enter the market. In 2023, the government introduced the First Home Savings Account (FHSA). Today, I want to explore how this account works and look at two stocks that can help fuel our home savings in the account. Let’s dive in.

What is the FHSA and how does it work?

The FHSA is a registered plan that allows prospective first-time home buyers to save for their first home tax free. However, this is subject to specific limits. Canadians in this bracket were able to open an FHSA for the first time on April 1, 2023. You must close your FHSA either after 15 years, when you reach the age of 71, or after you make your first qualifying withdrawal.

To make a qualifying withdrawal, an FHSA must fill out a form RC725 and have a written agreement to buy or build a qualifying home. The contribution limit for an FHSA stands at $8,000 for the first year. That will carry forward in each year to a lifetime maximum contribution limit of $40,000.

Below are two top stocks that I would consider snatching up for those who are just starting out with their FHSA. This means we will be playing with the $8,000 limit.

Here’s the first stock I’d use to power our home savings

Scotiabank (TSX:BNS) is one of the Big Six Canadian banks. Shares of this bank stock have dipped 1.8% month over month as of early afternoon trading on August 14. That has pushed the stock into negative territory so far in 2023.

Investors can expect to see Scotiabank’s next batch of earnings later this month. In the second quarter (Q2) of fiscal 2023, the bank saw adjusted net income fall to $2.2 billion or $1.70 per diluted share compared to $2.8 billion or $2.18 per diluted share in the previous year. Investors saving up for a home should not be deterred by the bank’s recent bout of turbulence. Like its peers, Scotiabank is a profit machine that you can trust for the long haul.

Shares of this bank stock currently possess a favourable price-to-earnings ratio of 9.5 at the time of this writing. Moreover, the stock offers a quarterly dividend of $1.06 per share. That represents a tasty 6.6% yield.

Don’t underestimate this housing stock that can help you become a homeowner

Tricon Residential (TSX:TCN) is a Toronto-based company that is an owner and operator of a portfolio which exceeds 37,000 single-family rental homes in the United States. Its shares have dropped 2.8% over the past month. The stock is still up 11% in the year-to-date period.

In Q2 2023, Tricon Residential delivered same home net operating income (NOI) growth of 6.3%. Shares of Tricon currently possess an attractive P/E ratio of 10. Moreover, it offers a quarterly dividend of $0.058 per share, which represents a 2.6% yield.

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 Ambrose O'Callaghan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tricon Residential. The Motley Fool recommends Bank of Nova Scotia. The Motley Fool has a disclosure policy.

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