Investing in shares of Canadian companies with fundamentally strong businesses and the ability to deliver profitable growth in the long term could help you outperform the broader markets and create substantial wealth. Additionally, leveraging the benefits of a TFSA (Tax-Free Savings Account) can amplify overall returns.
The notable advantage of a TFSA is that capital gains and dividends are not taxed. This provides a significant boost to long-term returns. With the TFSA contribution limit for 2024 standing at $7,000, let’s consider three Canadian stocks to buy and hold for the long term.
TFSA stock #1
Shares of the Canadian financial services company goeasy (TSX:GSY) could be a solid addition to your TFSA portfolio for capital gains and dividend income. The company offers loans and leasing services to subprime borrowers and benefits from a large addressable market and its efforts to capitalize on the existing demand. Further, goeasy’s solid risk-management practices lead to the stable performance of its loans, which supports its bottom-line growth.
Investors should note that goeasy has been growing its revenue and adjusted earnings at a double-digit rate for over a decade. Meanwhile, in the past five years (ending December 31, 2023), goeasy’s revenue has grown at a compound annual growth rate (CAGR) of 19.8%, and its earnings per share (EPS) grew at a CAGR of 31.9%. Thanks to its stellar growth, goeasy stock appreciated 1,174% over the past decade. In addition, the company enhanced its shareholders’ returns through higher dividend payments.
The company could continue to witness solid demand for loans, led by the large lending market. Moreover, its omnichannel offerings, geographical expansion, and diversified funding sources will expand its loan portfolio and drive revenues. Strong sales, steady credit performance, and improving efficiency will drive earnings and support shares and payouts.
TFSA stock #2
TFSA investors could consider investing in Celestica (TSX:CLS) stock. The company’s financials will likely benefit from its exposure to thriving sectors such as vehicle electrification and artificial intelligence (AI). Moreover, Celestica’s business remains relatively resilient due to its diversified portfolio and revenue sources.
It’s worth highlighting that Celestica stock has appreciated about 305% in one year, driven by strong AI-led demand. Celestica is expected to capitalize on the growing adoption and deployment of AI computing by its hyperscaler customers. Moreover, strong demand across its commercial aerospace submarkets will likely sustain and drive its Aerospace and Defense revenues.
While the electric vehicle (EV) market is facing short-term challenges, the structural shift towards EVs and smart energy solutions presents solid growth opportunities for the company in the long term.
TFSA stock #3
With its ability to deliver solid capital gains and focus on returning higher cash to its shareholders, Canadian Natural Resources (TSX:CNQ) is a compelling stock for TFSA investors. This Canadian blue-chip stock has appreciated more than 240% in five years, delivering an impressive average annualized return of 27.7%. Moreover, this oil and gas company has raised its dividend for 24 consecutive years at a CAGR of 21%.
Canadian Natural Resources’s diversified cash flows, long-life assets, and high-value reserves position it well to generate solid financials and make it relatively immune to the economic and commodity cycles. Moreover, the company benefits from low maintenance capital requirements and its focus on lowering operating costs, which supports profitability.
CNQ company is well-positioned to deliver solid organic growth. Additionally, its robust balance sheet will enable it to pursue acquisitions and other expansion opportunities, accelerating its growth rate and driving future dividend payments.
