If you start planning your retirement early, you can build a strong financial foundation for your future. One of the best tools for retirement planning in Canada is the Tax-Free Savings Account (TFSA), which allows your investments to grow tax-free. However, to ensure a worry-free retirement, carefully choosing the right stocks for your TFSA is important, as you may want to maintain a balance of stable income and growth to create a portfolio that will sustain you through your retirement years.
In this article, I’ll reveal two of the best TFSA stocks that could help you achieve a worry-free retirement.
Source: Getty Images
A top bank stock for TFSA investors
Bank stocks are an excellent choice for TFSA investors as most large banks in Canada tend to offer stability and consistent dividends. One of the best options in this space could be Bank of Montreal (TSX:BMO), which is known for its strong dividend-growth track record and portfolio of diversified financial services. BMO currently has a market cap of $89.1 billion as its stock trades at $122.19 per share with about 8.4% month-to-date gains. At this market price, it offers a 5.1% annualized dividend yield.
In the five years ended in October 2023, Bank of Montreal’s total revenue rose 23.4%, despite facing the global pandemic-driven operational challenges. More importantly, the Canadian lending giant’s adjusted annual earnings in these five years soared by 30.5%, reflecting the underlying strength of its diversified business operations.
For TFSA investors looking for reliable income, BMO’s consistent dividend growth could be a key attraction. As of the third quarter of 2024, the bank declared a quarterly dividend of $1.55 per share, up 5% YoY (year over year). In addition to consistently growing dividends, its strong capital position with a common equity tier-one ratio of 13% makes the Bank of Montreal a great long-term stock for conservative investors.
And a top growth stock for your TFSA
While BMO offers stability and reliable dividend income, pairing it with a high-growth Canadian stock like Shopify (TSX:SHOP) can help you create a well-rounded balance in your TFSA portfolio. After rallying by 18.5% so far in the third quarter, SHOP stock now trades at $107.11 per share with a market cap of $138 billion.
Over the last decade, Shopify has established itself as one of the top global e-commerce platform providers. In fact, the global pandemic gave a big boost to its financial growth as more businesses moved online and embraced digital transformation. This was one of the key reasons why the company’s total revenue climbed roughly by 558% in five years between 2018 and 2023. Its adjusted annual earnings also saw a remarkable surge from just US$0.14 per share in 2018 to US$0.73 per share in 2023.
Besides its consistently expanding merchant base, the increasing adoption of Shopify Payments and its subscription solutions brightens its long-term growth outlook. While Shopify doesn’t offer a dividend, its impressive growth potential makes it an attractive option for TFSA investors seeking capital appreciation for a worry-free retirement.
