After a decline of 1.5% last week, the S&P/TSX Composite Index rose 0.4% yesterday amid improving investors’ confidence due to falling inflation and easing interest rates. If you have not maxed out the $7,000 contribution limit of your TFSA (tax-free savings account) for this year, here are three top stocks you can add now.
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goeasy
goeasy (TSX:GSY) offers various products covering the entire non-prime credit market, thus growing its loan portfolio at a healthier rate. It started its consumer lending business in 2006 and took 13 years to reach a loan portfolio of $1 billion. Meanwhile, since then, the company has quadrupled its loan portfolio to $4.1 billion by the end of the second quarter. The expansion of its loan portfolio has grown its revenue at an annualized rate of 19% over the last 10 years, while its adjusted EPS (earnings per share) has grown at an impressive 28.6%.
Continuing its uptrend, the company’s top line and adjusted EPS are up 25% and 24%, respectively, in the first six months of this year. Besides, management has announced its preliminary results for the third quarter, with its loan portfolio expanding by $235 million to $265 million. Management is also hopeful of reaching a loan portfolio of $6 billion by the end of 2026, representing a 46% increase from the second quarter of 2024. So, its growth prospects look healthy. Notably, the non-prime lender has raised its dividends at a CAGR (compound annual growth rate) of 30% for the last 10 years and currently offers a forward dividend yield of 2.7%. Considering all these factors, I believe goeasy would be an excellent buy.
Dollarama
Dollarama (TSX:DOL) is another top stock to add to your TFSA due to its solid underlying business and healthy growth prospects. The company has adopted a superior direct sourcing method, enhancing its bargaining power while lowering intermediatory expenses. Also, its effective logistics allow the retailer to offer various consumer products at attractive prices, thus enjoying healthy same-store sales even during challenging market conditions.
Meanwhile, the company plans to increase its store network from 1,583 to 2,000 by the end of 2031. Given its capital-efficient business model, quick sales ramp-up, and lower average payback period of less than two years, these expansions could boost the company’s top and bottom lines.
Besides, the discount retailer also owns a 60.1% stake in Dollarcity, which operates 570 retail stores in Latin America. Meanwhile, Dollarcity has planned to increase its store count to 1,050 over the next six years. Also, Dollarama owns an option to increase its stake by 9.9% in Dollarcity by the end of 2027. These growth initiatives could continue to drive Dollarama’s financials and stock price in the coming years, thus making it an excellent buy.
Hydro One
Hydro One (TSX:H) is an electric utility company operating 99% of its business through rate-regulated contracts with no material exposure to commodity price fluctuations. So, the company’s financials are less susceptible to market volatility. The company has grown its rate base at an annualized rate of over 5% since 2018. It has also taken several cost-cutting measures, boosting its operating margins. Supported by these solid financials, the company has returned around 122% in the last five years at an annualized rate of 17.3%.
Moreover, Hydro One is continuing with its $11.8 billion capital expenditure plan, which could grow its rate base at an annualized rate of 5% through 2027. Along with the rate base expansion, favourable rate revisions and initiatives to improve its operating efficiency could boost its financials in the coming years. Meanwhile, Hydro One’s management expects its adjusted EPS to increase by a 5-7% CAGR through 2027. Also, the company, which currently offers a forward dividend yield of 2.8%, is hopeful of raising its dividends at an annualized rate of 6% for the next three years. Considering all these factors, I believe Hydro One would be a worthy addition to your TFSA.
