Are you a Tax-Free Savings Account (TFSA) holder who still isn’t sure what to do with the extra $7,000 worth of contribution room you have for 2025?
If so, TSX stocks are worth looking into.
Although the TFSA shelters both Canadian and global equities from taxation, the tax-free effect is greatest with Canadian stocks, as you pay no dividend withholding tax on them. Also, Pierre Poilievre is promising to add a $5,000 top-up to Canadians’ TFSA contribution room that can only be invested in Canadian stocks if he’s elected. So, it’s worth thinking about which Canadian stocks you might buy if Poilievre gets elected and his proposed top-up gets implemented. In this article, I will explore two TSX stocks that may be worth buying with your new TFSA contribution room in 2025.
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Alimentation Couche-Tard
Alimentation Couche-Tard Inc (TSX:ATD) is a Canadian gas station company. It operates the famous nationwide Circle K chain as well as the Couche-Tard chain in Quebec.
What makes Alimentation Couche-Tard an attractive TFSA stock is the fact that it’s a long-term compounder. The company does not pay out huge amounts of profit as dividends but instead re-invests the money back into its own business. As a result of this compounding, Alimentation Couche-Tard has grown dramatically over the years. Over the last 10 years, the company’s earnings have risen 224%, and its stock price has risen 168%.
Alimentation Couche-Tard ran into some troubles in recent years. It had a few bad earnings releases last year due to low fuel prices, and its ongoing 7-Eleven takeover bid is attracting unwanted attention from regulators. The company’s offer price for 7-Eleven has also raised some eyebrows: a whopping $47 billion would require using considerable debt, which ATD has traditionally avoided using. Because of skepticism over the deal, ATD is down about 10% over the last year. However, the company is still highly profitable and growing, with revenue up 9% in the trailing 12-month period. This long-term compounder could be a wise TFSA to buy today.
Fortis
Fortis (TSX:FTS) is a Canadian utility stock that is a staple of many retirement portfolios worldwide. The company is a Dividend King, having raised its dividend for 51 consecutive years. It is a financially sound utility with a manageable ratio of debt to equity, good interest coverage, and a payout ratio far below 100%. In a sector that is known for sometimes pushing it with dividend payouts, Fortis’s financial soundness stands out.
Fortis is different from some utilities in that it doesn’t rest on its laurels. The company is currently in the middle of a five-year, $26 billion capital-expenditure plan that aims to take the company’s rate base from $38.8 billion to $53 billion. This increase in the rate base should pave the way for higher earnings and cash flows in the future. Fortis has to finance these expenditures with debt and equity, but with interest rates coming down this year, financing costs shouldn’t be too much of a problem. So, Fortis is a very intriguing buy at today’s price level.
