2 Top Stocks to Add to Your TFSA in February 2024

These two TSX stocks can be excellent holdings for your self-directed TFSA portfolio to inject stability and tax-free wealth growth.

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The Tax-Free Savings Account (TFSA) came as a blessing for Canadians in 2008. If you are a Canadian citizen over 18, you can earn tax-free on holdings within your TFSA. Each year, you get more contribution room to grow your TFSA portfolio and unlock greater tax-free earnings on assets held within the account.

Cumulatively, the total contribution room in TFSAs for people who were eligible for one since its inception is $95,000 after the $7,000 increase this year by the Canada Revenue Agency (CRA).

Originally designed to encourage Canadians to improve their savings practices, it has become an invaluable investment vehicle for financially savvy investors. You can use the contribution room in your TFSA to hold cash and grow it through interest income.

However, allocating some of the space to hold stocks can help you grow your wealth faster. Remember, earnings from qualifying assets in the account can grow without incurring taxes. It means you can use it to hold growth stocks and dividend stocks to grow your wealth through capital gains and dividend income as well.

Today, I will discuss two top stocks you can consider adding to your self-directed TFSA portfolio for this purpose.

A stock to inject growth

Nuvei (TSX:NVEI) is a $4.99 billion market capitalization firm headquartered in Montreal that is benefitting from the growth of digital transactions. The company provides payment technology and solutions to clients worldwide.

Its services include payment gateways, security and risk management, and recurring and subscription billing, among many others. Nuvei continues to innovate and launch new products, make new partnerships, and expand its geographical footprint worldwide.

As of this writing, Nuvei stock trades for $35.85 per share, reflecting an 8.80% year-to-date growth. In the same period, the S&P/TSX Composite Index has grown by 1.68%.

Its growth reflected against the benchmark index for the Canadian equity markets shows that it is beating the broader market by significant margins. With a growing addressable market, the company is well-positioned to deliver substantial long-term growth.

A stock for reliable dividend income

Created with Highcharts 11.4.3Fortis PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.ca

Fortis (TSX:FTS) is a $25.73 billion market capitalization diversified utility holdings company. It owns and operates several natural gas and electricity utility businesses across Canada, the U.S., Central America, and the Caribbean.

It generates most of its revenue through long-term contracted assets in highly rate-regulated markets. This means that Fortis earns predictable cash flows that the company can use to comfortably fund its capital programs and grow shareholder dividends.

Fortis is a Canadian Dividend Aristocrat and one of the only two Canadian Dividend Kings on the TSX. It has grown its shareholder dividends for the last 50 years. Often referred to as a bond proxy, its reliable dividends make it a staple holding for long-term investors.

Higher interest rates have dragged its share prices down due to increased borrowing costs. However, the essential nature of its services virtually guarantees solid cash flows and dividends. As of this writing, it trades for $52.67 per share and boasts a 4.48% dividend yield.

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Foolish takeaway

Through a stock with a strong underlying business and high-growth potential like Nuvei stock, you can inject wealth growth through capital gains in your TFSA. Since the CRA does not tax capital gains, you can buy and hold growth stocks like NVEI in your TFSA for years to capture substantial growth without having to pay taxes on their growing value.

Similarly, allocating some of the contribution room to a Canadian Dividend Aristocrat like Fortis stock can help you use your TFSA as a tax-free passive-income stream.

By reinvesting the shareholder dividends to purchase more shares of FTS stock, you can grow the value of your holding through the power of compounding. When you have substantial shares, you can let the dividends line your account balance with additional cash to withdraw as another revenue stream that does not incur income taxes.

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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 Adam Othman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nuvei. The Motley Fool recommends Fortis. The Motley Fool has a disclosure policy.

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