3 Top Canadian Stocks to Enhance Your TFSA

For Canadian investors looking to maximize long-term, tax-free wealth creation, the Tax-Free Savings Account (TFSA) is one of the most powerful tools available. While cash and Guaranteed Investment Certificates (GICs) offer stability, equities historically deliver the strongest long-term returns. 

Investors seeking to compound wealth inside a TFSA can consider these three top Canadian stocks today.

Intact Financial: A steady compounder in any market

Intact Financial (TSX:IFC) has established itself as the premier property and casualty insurer in Canada — and a strong financial performer on the Toronto Stock Exchange (TSX). Its long-term track record of industry-leading returns on equity (ROE) illustrates a business that consistently deploys investor capital more effectively than its peers.

In its most recent results reported on November 4, the company delivered a 4% year-to-date increase in operating direct premiums written. 

Additionally, Intact posted a highly attractive combined ratio of 89.0% across its operations. Since insurers earn an underwriting profit when this ratio falls below 100%, the number highlights disciplined risk management and profitable growth across geographies and business lines.

The company’s profitability trend continues to strengthen. In the third quarter, adjusted ROE rose to 19.9%, up from 16.7% the year before. Layered on top of that is an impressive dividend-growth record: Intact has raised its dividend for 15 consecutive years at an average annual clip of 9.3%. It has also outperformed the broader Canadian market over both five- and 10-year periods.

At under $281 per share at writing, analysts see the stock trading at a 12% discount to fair value. With a nearly 1.9% yield, reliable earnings power, and decades of predictable demand for insurance services, Intact remains a high-quality TFSA holding — especially on market dips.

Constellation Software: A rare correction in the tech stock

Constellation Software (TSX:CSU) is widely regarded as one of Canada’s greatest long-term compounders. Yet even elite businesses experience pullbacks, and the stock’s recent weakness has created an uncommon buying window — one that could fuel a potential Santa Claus rally as investors look ahead to a new year.

Constellation’s strategy is straightforward but highly effective: acquire small, profitable vertical-market software companies and let them run independently, maintaining their culture and providing freedom for innovation for superior long-term cash flow growth. 

That approach continues to pay off. For the first nine months of the year, free cash flow surged 27% to more than $1.2 billion, underscoring the company’s ability to keep scaling at an impressive pace.

The last time Constellation traded at such a low price-to-earnings (P/E) ratio was back in 2019, before several years of massive share-price appreciation. Today, analyst estimates indicate the stock trades at an attractive 31% discount to fair value, implying potential near-term upside of about 45%.

For TFSA investors with a long-term horizon, Constellation offers a rare combination of disciplined capital allocation, durable revenue streams, and a management team with a stellar track record. When this stock goes on sale, it rarely stays there for long.

goeasy: High risk, High potential for TFSA growth

For investors comfortable with risk and volatility, goeasy (TSX:GSY) offers one of the most compelling risk-reward trade-offs on the TSX today. 

As a non-prime consumer lender, its business is naturally more sensitive to economic cycles, interest rates, and loan-loss trends. But after a sharp selloff in recent months, investors have started stepping back in — suggesting the stock is too cheap to ignore.

Despite its higher-risk profile, goeasy has delivered extraordinary long-term performance. Over the past decade, the stock has generated total returns of 782%, far outpacing the broader market’s 214%. 

The company continues to grow at a robust pace. In the third quarter, the loan portfolio expanded 24% to $5.4 billion, while loan originations climbed 13% and revenue rose 15% to $440 million. The net charge-off rate improved 0.30% year over year to 8.9%.

At about $147 per share, goeasy yields a compelling 4.3%. Its dividend-growth track record is remarkable as well, with a 10-year average annual increase of 30%. The analyst consensus price target suggests the stock trades at a 35% discount, implying nearly 53% upside potential.

For TFSA investors who can stomach higher risk, goeasy is a top long-term growth idea.

Investor takeaway

These three companies — Intact Financial, Constellation Software, and goeasy — offer different risk profiles but share one common trait: the potential to significantly enhance TFSA wealth over time.

The post 3 Top Canadian Stocks to Enhance Your TFSA appeared first on The Motley Fool Canada.

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More reading

• 2 Dead-Simple Canadian Stocks to Buy With $500 Right Now
• Top Dividend-Growth Stocks to Buy Now in Canada
• 2 Stocks to Create Lasting Family Wealth 
• The TSX Stock I’m Buying Now: It’s a Steal!
• My 3 Top Growth Picks for December

Fool contributor Kay Ng has positions in Constellation Software, goeasy, and Intact Financial. The Motley Fool recommends Constellation Software and Intact Financial. The Motley Fool has a disclosure policy.