The TFSA (tax-free savings account) allows investors to earn tax-free returns on a specified investment amount called contribution room. For this year, the Canadian Revenue Agency has fixed the contribution room at $7,000. Investors should be careful in this volatile equity market, as the decline in stock value and subsequent stock selling could reduce the contribution room. Meanwhile, here are four top TSX stocks that are ideal additions to your TFSA in any market.
Canadian Utilities
Canadian Utilities (TSX:CU) is a diversified global energy infrastructure corporation that transmits and distributes electricity and natural gas. Besides, it has a strong presence in power production and industrial water solutions. Given its low-risk utility business, the company has been generating stable and predictable cash flows, thus allowing it to raise its dividends for 51 years, the longest public Canadian company with uninterrupted dividend growth. Besides, it offers a healthy dividend yield of 5.90%.
Further, Canadian Utilities has planned to expand its rate base at an annualized rate of 3-4.4% from $15.4 billion in 2023 to $16.7-$17.4 billion by 2026. Besides, the company has around 1.3 gigawatts of renewable energy-producing facilities in the pipeline, supporting its growth in the coming years. Also, given its capital-intensive business, the company could benefit from future interest rate cuts. So, I believe Canadian Utilities would be an excellent addition to your TFSA in this volatile environment.
TC Energy
TC Energy (TSX:TRP), which has been raising dividends since 2000 at an annualized rate of 7%, is my second pick. It operates a diversified midstream business, with around 97% of its adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) underpinned by rate regulations and long-term contracts. So, it generates stable cash flows irrespective of the economic outlook, thus allowing the company to raise its dividends consistently. Besides, it also offers a juicy dividend yield of 7.81%.
Further, TC Energy is investing around $8-$8.5 billion and hopes to put $7 billion of assets into service this year. It has also strengthened its balance sheet by generating $3 billion from non-core asset sales. Given its stable cash flows, healthy growth prospects, and high yield, TC Energy would be a timely buy right now.
Pizza Pizza Royalty
Another top TSX stock worth adding to your TFSA would be Pizza Pizza Royalty (TSX:PZA), which operates Pizza Pizza and Pizza 73 brand restaurants through its franchisees. Given its highly franchised business model, the company’s financials are less susceptible to rising prices and wage inflation, thus generating stable cash flows. Besides, its solid same-store sales and the expansion of its restaurant network have helped the company raise its dividends three times last year. Also, its forward dividend yield stands at an attractive 6.96%.
Meanwhile, PZA added 45 new restaurants to its royalty pool this year and removed 14 that ended their operations, thus increasing the number of restaurants in its royalty pool to 774. Further, it is also constructing several restaurants that could become operational in the coming quarters. Besides, the company is also focused on menu innovation and marketing and promotional activities, which could boost its same-store sales. So, I believe Pizza Pizza Royalty is well-positioned to continue paying dividends at a healthier rate.
goeasy
goeasy (TSX:GSY) has delivered solid performances over the last 20 years by growing its top and bottom lines in double digits annually. Despite the sales growth, the company’s market share in the Canadian $218 billion sub-prime consumer credit market stands at 2%. So, it has a considerable scope to expand its business. The company is strengthening its digital infrastructure, expanding its product offerings, and growing its delivery channels to increase its market share.
Meanwhile, goeasy’s management expects its loan portfolio to grow by 65% over the next three years to reach $6 billion in 2026. The loan portfolio expansion could drive its revenue at an annualized rate of 12.9%. Further, the adoption of enhanced underwriting and income verification processes and next-gen credit models has lowered its risks. So, I expect the uptrend in goeasy’s financials to continue, thus delivering superior returns in the long run.
