By Rajiv Nanjapla at The Motley Fool Canada
A Tax-Free Savings Account (TFSA) allows investors to earn tax-free returns on a specified amount known as the contribution limit. However, investors should be careful when investing through a TFSA, as losses from declining stock prices and subsequent sales can not only erode capital but also permanently reduce available contribution room.
Given the current uncertain environment, marked by rising oil prices and escalating geopolitical tensions, investors should focus on adding high-quality Canadian stocks with resilient business models and limited exposure to economic volatility to their TFSAs. Against this backdrop, let’s look at two Canadian stocks that could be ideal additions to a TFSA portfolio during this period of uncertainty.
Fortis
Fortis (TSX:FTS) is an electric and natural gas utility company serving approximately 3.5 million customers across the United States, Canada, and the Caribbean. Supported by its regulated asset base and strong focus on low-risk transmission and distribution operations, the company’s financial performance remains relatively insulated from commodity price fluctuations and broader economic volatility. In addition, Fortis has consistently expanded its rate base while improving operating efficiency, supporting steady earnings and long-term stock price appreciation.
Backed by its stable business model and reliable cash flows, Fortis has delivered an average annual shareholder return of 10.5% over the past two decades. The company has also increased its dividend for 52 consecutive years and currently offers a forward dividend yield of 3.3%.
Looking ahead, demand for Fortis’s services continues to grow amid economic expansion, rapid industrialization, rising data centre development, and the increasing adoption of electric vehicles. To capitalize on these long-term trends, the company is advancing its planned $28.8 billion capital investment program, which could grow its rate base at an annualized rate of 7% through 2030 to approximately $57.9 billion.
In addition to these expansion initiatives, Fortis continues to focus on preventive maintenance, operational innovation, and efficiency programs to support long-term profitability. Amid these growth prospects, the company’s management is hopeful of raising its dividend by 4–6% annually through 2030. Given its resilient business model, dependable dividend growth, and visible long-term expansion opportunities, Fortis appears to be an excellent addition to a TFSA portfolio.
Dollarama
Another stock that appears well-suited for a TFSA is Dollarama (TSX:DOL), a discount retailer operating 1,691 stores across Canada and 402 locations in Australia. Its direct-sourcing model strengthens bargaining power while eliminating intermediary costs, and its efficient logistics network helps keep operating expenses low. These advantages enable Dollarama to offer a broad range of products at attractive prices, supporting resilient same-store sales growth regardless of broader economic conditions.
The company has also consistently expanded its store network over the years, driving strong financial growth and long-term stock price appreciation. Over the last decade, Dollarama has generated returns of approximately 495%, representing an annualized return of 19.5%.
Looking ahead, Dollarama plans to continue expanding its footprint by opening 60–70 new stores annually. Management expects the company’s Canadian and Australian store counts to reach 2,200 and 700 locations, respectively, by the end of fiscal 2034. Supported by healthy same-store sales, a capital-efficient operating model, rapid sales ramp-up, short payback periods, and relatively low maintenance requirements, these expansion initiatives could significantly strengthen the company’s revenue and profitability over time.
In addition, Dollarama owns a 60.1% stake in Dollarcity, which currently operates 732 discount stores across five Latin American countries. Dollarcity also plans to expand its network to 1,050 stores by the end of fiscal 2031, while Dollarama holds the option to increase its ownership stake to 70% by the end of next year. As a result, Dollarcity’s contribution to Dollarama’s earnings could continue to grow in the coming years. Given its resilient business model and strong long-term growth prospects, Dollarama appears well-positioned to continue delivering solid financial performance and shareholder returns.
The post 2 Canadian Stocks Built to Be TFSA Cornerstones Through a Volatile Market appeared first on The Motley Fool Canada.
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Fool contributor Rajiv Nanjapla has no position in any of the stocks mentioned. The Motley Fool recommends Dollarama and Fortis. The Motley Fool has a disclosure policy.
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