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!
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.
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.
TORONTO – Canada’s main stock index was little changed in late-morning trading as the financial sector fell, but energy and base metal stocks moved higher.
The S&P/TSX composite index was up 0.05 of a point at 24,224.95.
In New York, the Dow Jones industrial average was down 94.31 points at 42,417.69. The S&P 500 index was down 10.91 points at 5,781.13, while the Nasdaq composite was down 29.59 points at 18,262.03.
The Canadian dollar traded for 72.71 cents US compared with 73.05 cents US on Wednesday.
The November crude oil contract was up US$1.69 at US$74.93 per barrel and the November natural gas contract was up a penny at US$2.67 per mmBTU.
The December gold contract was up US$14.70 at US$2,640.70 an ounce and the December copper contract was up two cents at US$4.42 a pound.
This report by The Canadian Press was first published Oct. 10, 2024.
