TFSA Investors: 3 of the Best TSX Stocks to Buy as a Newbie
Image Credit: Photo by CIRA / .CA.
The start of the new year means Canadian investors can contribute $ 6,000 fee to their Tax Free Savings Account (TFSA). Likewise, you can re-contribute any contribution space removed from your TFSA in 2021 (as long as it stays within the total contribution limit of $ 81,500). There are several rules you need to follow to do this, so be sure to speak with a tax professional, financial advisor, or the Canada Revenue Agency (CRA) first.
The TFSA is the best account for building investment returns
The TFSA is an excellent tool for building wealth. There are no other registered accounts in Canada that are not subject to tax. The TFSA allows Canadians to compound their investment returns faster because they do not have to share a portion of the profits, income or interest with the CRA. That’s why filling your TFSA contribution space is the best place to start building an investment portfolio.
We all have $ 6,000 of new contribution space for 2022. If you’re looking for a variety of ideas to invest in, here are three Canadian stocks that look interesting today.
High Income Equity for a TFSA
Brookfield Infrastructure Partners (TSX: BIP.UN) (NYSE: BIP) is a great TFSA stock because it grows faster than a utility, but it has defensive characteristics, similar to a utility. It owns and operates a diverse portfolio of critical assets that include ports, railways, transmission lines, pipelines, midstream operations, cell phone towers and data centers.
It is ideal for first-time investors, as its portfolio in itself offers diversification. Likewise, its assets are largely contracted or regulated, so its cash flows are reliable. This helps to support an attractive dividend of 3.5%.
Over the past decade, he has increased that dividend by a compound annual rate of 10%. That could slow down in the future, but the company’s organic and acquisition pipeline is still expected to maintain strong annual total returns for teens for many years to come.
Blue-chip stock on the TSX
Another great title for a new TFSA wallet is Canadian Pacific Railway (TSX: CP) (NYSE: CP). It might not be the most exciting company, but it has generated average annual returns of 20% over the past 10 years. This rate largely beat the TSX Index at the time. Railways are essential to the economy and cannot be duplicated or replaced. As a result, CP has a strong natural competitive divide.
Canadian Pacific Completes Acquisition of Kansas City Southern Railway. This will extend CP’s rail network from Canada to Mexico. This should give it a unique competitive advantage and create new avenues for growth for the business. CP has a senior management team, which is likely to continue to generate stable returns in the future.
Growth value at the right price
If you are looking for a more growth oriented TFSA stock, BRP (TSX: DOO) (NASDAQ: DOOO) looks interesting. Over the past five years, BRP’s stock has risen 277%. That’s an annual compound return of 30%! Still, for higher growth stock, it’s cheap. It trades with a price / earnings ratio of less than 10. If you want growth at a very fair price, this is definitely the stock.
BRP manufactures and distributes recreational and marine vehicles. It owns leading brands in the market like Ski-Doo, Sea-Doo and Can-Am. Recreational vehicles have been in high demand since the pandemic, which has generated very high revenues.
It has faced some supply chain challenges, but these are largely temporary and transient. The company has a strong balance sheet and has aggressively bought back stocks over the years. For a well-managed compound growth stock, BRP is an excellent choice for a new TFSA portfolio.