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Since capital gains and dividend income earned in the TFSA (tax-free savings account) are not taxed, investing through it improves overall returns. Additionally, the current market scenario presents a strong investment opportunity for investors to take a long position in TSX investment grade stocks. With this in mind, let’s look at two stocks TFSA investors should target to generate tax-free capital gains and steady income.
easy
easy (TSX: GSY) is a terrific stock to invest in at current levels, given its strong growth profile. As fear of macroeconomic headwinds affecting economic growth and consumer spending has driven easy stocks down, investors should take this opportunity to accumulate its stocks through the TFSA route.
goeasy is a leading stock for growth and revenue, and there are two good reasons for that. He kept growing his top and bottom lines at a remarkable rate. Additionally, strong earnings growth has led to higher dividend payouts.
For context, goeasy has enjoyed double-digit sales and profit growth for nearly two decades. Meanwhile, it has increased its dividend by a CAGR of 34.5% over the past eight years.
Despite the uncertainty, management’s forecasts indicate that the momentum of goeasy’s business will continue in the years to come. Management expects double-digit revenue growth over the next three years, which is encouraging.
Its comprehensive lending product portfolio, large subprime lending market, geographic and channel expansion, and strong competitive position will support its revenue. At the same time, the increasing penetration of secured loans, higher ticket sizes and new product launches bode well for growth. Additionally, the leverage resulting from increased sales, high redemption volumes and expanded margins will likely dampen its earnings and result in higher dividend payments.
goeasy stock has fallen around 54% from its 52-week high. Its steep price decline, powerful growth catalysts and 3.7% dividend yield make it a solid long-term investment.
Enbridge
The meteoric recovery in oil prices and strong demand for energy provide a multi-year growth opportunity for Enbridge (TSX: ENB)(NYSE: ENB). Underinvestment in new supply due to uncertainty related to the COVID-19 pandemic, stable demand and disruptions caused by the Russian-Ukrainian war indicate that commodity prices could remain high in the future predictable, which would support Enbridge’s growth.
Enbridge is poised to benefit from recently commissioned capital projects. In addition, its solid guaranteed capital program portends a healthy future. Additionally, the focus on strategic acquisitions, core business momentum and renewables capacity expansion bode well for growth and make it a prime energy stock to invest in.
Enbridge is also famous for its strong dividend payouts. The company has been paying a regular dividend for nearly 67 years. Meanwhile, he has cultivated it for the past 27 consecutive years. Its diverse revenue streams, long-term contractual arrangements, inflation-protected EBITDA and focus on productivity savings support its payouts.
The energy infrastructure company is confident that it will achieve 5-7% annual growth in distributable cash flow over the medium term. This would allow it to further improve its dividend payouts over this period. By investing in Enbridge, TFSA investors can earn a high yield of 6.5% and benefit from its share price appreciation over the next few years.
