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TFSA Investors: Why You Should Invest Your Room ASAP in These 2 Stocks

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This year’s Tax-Free Savings Account (TFSA) contribution room of $6,500 may not seem like a lot. Let’s say you earn annual returns of 8.19% — the 10-year average Canadian stock market return. The $6,500 will become $21,169.97 in 15 years.

The TFSA is designed for Canadians to regularly save and invest. If you save and invest $6,500 per year over the next 15 years for 8.19% in your TFSA, you’d have built a nice nest egg of $193,790.44. Of the amount, $97,500 came from your savings.

Moreover, you’d be happy to know, the TFSA contribution room adjusts to inflation in $500 increments. This means more room to make tax-free returns.

Here are some top stocks that you should consider investing using your TFSA room as soon as possible.

Big U.S. bank stocks

It’s not at all odd to buy U.S. stocks in your TFSA. Right now, big U.S. bank stocks could be on sale, as they have sold off with the Silicon Valley Bank fallout. Particularly, Wells Fargo (NYSE:WFC) stock has declined about 20% in the last month. It now trades at a discount to its book value.

Assuming its fair value is 1.2 times book, the stock could trade at about US$50.22 per share on a recovery over the near term. In fact, analysts are even more optimistic, as their consensus 12-month price target is US$52.67.

WFC Price to Book Value data by YCharts

At US$37.38 per share at writing, it means the stock can appreciate 34-41% over the near term. As well, the investment-grade BBB+ S&P credit rating stock offers a dividend yield of 3.2%. Inside the TFSA, there would be a U.S. withholding tax of 15% on the dividend, resulting in an effective dividend yield of about 2.7%. However, the primary focus on the investment would be price appreciation. So, the withholding tax on the foreign dividend is negligible.

Brookfield Renewable

Brookfield Renewable Partners (TSX:BEP.UN) is an excellent buy-and-hold dividend stock in the TFSA for passive income and long-term price appreciation. It’s a diversified renewable power platform with 25 gigawatts (GW) of capacity across technologies and continents. Specifically, 53% of its capacity is from hydro power, 20% is from wind, and 15% is solar. It generates sustainable cash flows from long-term power-purchase agreements averaging 14 years.

Importantly, the dividend stock has outperformed the utilities sector. For example, its five-year returns were 19% versus the utility indexes of 9-10%. Moreover, it consistently increases its cash distribution. For reference, its 10-year cash-distribution growth rate is 5.7%. At US$31.51 per unit at writing, the stock yields 4.3% and trades at a discount of about 17%. So, over the next 12 months, it can potentially deliver total returns of close to 25%.

The latest news is that, along with its institutional partners, BEP is acquiring Australia’s largest, integrated power generation and energy retailer business that has a 24% market share! This acquisition provides BEP the opportunity to invest at least AU$20 billion to build up to 14 GW of renewable, storage, and firming capacity over the next decade to support the decarbonization of the electricity grid in the country.

Assuming no valuation expansion, a conservative estimate of long-term total returns in the top renewable stock is 9.3%. If this return were to materialize for the next 30 years, an initial $6,500 investment would transform into $93,652.25!

 

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Tesla shares soar more than 14% as Trump win is seen boosting Elon Musk’s electric vehicle company

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NEW YORK (AP) — Shares of Tesla soared Wednesday as investors bet that the electric vehicle maker and its CEO Elon Musk will benefit from Donald Trump’s return to the White House.

Tesla stands to make significant gains under a Trump administration with the threat of diminished subsidies for alternative energy and electric vehicles doing the most harm to smaller competitors. Trump’s plans for extensive tariffs on Chinese imports make it less likely that Chinese EVs will be sold in bulk in the U.S. anytime soon.

“Tesla has the scale and scope that is unmatched,” said Wedbush analyst Dan Ives, in a note to investors. “This dynamic could give Musk and Tesla a clear competitive advantage in a non-EV subsidy environment, coupled by likely higher China tariffs that would continue to push away cheaper Chinese EV players.”

Tesla shares jumped 14.8% Wednesday while shares of rival electric vehicle makers tumbled. Nio, based in Shanghai, fell 5.3%. Shares of electric truck maker Rivian dropped 8.3% and Lucid Group fell 5.3%.

Tesla dominates sales of electric vehicles in the U.S, with 48.9% in market share through the middle of 2024, according to the U.S. Energy Information Administration.

Subsidies for clean energy are part of the Inflation Reduction Act, signed into law by President Joe Biden in 2022. It included tax credits for manufacturing, along with tax credits for consumers of electric vehicles.

Musk was one of Trump’s biggest donors, spending at least $119 million mobilizing Trump’s supporters to back the Republican nominee. He also pledged to give away $1 million a day to voters signing a petition for his political action committee.

In some ways, it has been a rocky year for Tesla, with sales and profit declining through the first half of the year. Profit did rise 17.3% in the third quarter.

The U.S. opened an investigation into the company’s “Full Self-Driving” system after reports of crashes in low-visibility conditions, including one that killed a pedestrian. The investigation covers roughly 2.4 million Teslas from the 2016 through 2024 model years.

And investors sent company shares tumbling last month after Tesla unveiled its long-awaited robotaxi at a Hollywood studio Thursday night, seeing not much progress at Tesla on autonomous vehicles while other companies have been making notable progress.

Tesla began selling the software, which is called “Full Self-Driving,” nine years ago. But there are doubts about its reliability.

The stock is now showing a 16.1% gain for the year after rising the past two days.

The Canadian Press. All rights reserved.

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S&P/TSX composite up more than 100 points, U.S. stock markets mixed

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TORONTO – Canada’s main stock index was up more than 100 points in late-morning trading, helped by strength in base metal and utility stocks, while U.S. stock markets were mixed.

The S&P/TSX composite index was up 103.40 points at 24,542.48.

In New York, the Dow Jones industrial average was up 192.31 points at 42,932.73. The S&P 500 index was up 7.14 points at 5,822.40, while the Nasdaq composite was down 9.03 points at 18,306.56.

The Canadian dollar traded for 72.61 cents US compared with 72.44 cents US on Tuesday.

The November crude oil contract was down 71 cents at US$69.87 per barrel and the November natural gas contract was down eight cents at US$2.42 per mmBTU.

The December gold contract was up US$7.20 at US$2,686.10 an ounce and the December copper contract was up a penny at US$4.35 a pound.

This report by The Canadian Press was first published Oct. 16, 2024.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

The Canadian Press. All rights reserved.

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S&P/TSX up more than 200 points, U.S. markets also higher

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TORONTO – Canada’s main stock index was up more than 200 points in late-morning trading, while U.S. stock markets were also headed higher.

The S&P/TSX composite index was up 205.86 points at 24,508.12.

In New York, the Dow Jones industrial average was up 336.62 points at 42,790.74. The S&P 500 index was up 34.19 points at 5,814.24, while the Nasdaq composite was up 60.27 points at 18.342.32.

The Canadian dollar traded for 72.61 cents US compared with 72.71 cents US on Thursday.

The November crude oil contract was down 15 cents at US$75.70 per barrel and the November natural gas contract was down two cents at US$2.65 per mmBTU.

The December gold contract was down US$29.60 at US$2,668.90 an ounce and the December copper contract was up four cents at US$4.47 a pound.

This report by The Canadian Press was first published Oct. 11, 2024.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

The Canadian Press. All rights reserved.

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