2 stocks worth buying and holding in a TFSA right now

Although this year has been strong for the Canadian stock markets, with the benchmark S&P/TSX composite index With an increase of around 30% and concerns about ongoing geopolitical tensions, the potential for an artificial intelligence (AI) bubble and increased valuations remains. As a result, investors must be careful when deploying capital through their tax-free savings accounts (TFSAs), as market downturns and subsequent selling can not only erode capital but also permanently shrink the TFSA’s contribution room.

Against this backdrop, here are two Canadian stocks that I believe are well suited for inclusion in a TFSA at this time.

Enbridge

Enbridge (TSX: ENB) stands out as an attractive Canadian stock for inclusion in a TFSA, backed by reliable financial performance thanks to its regulated asset base and long-term take-or-pay contracts. The diversified energy company operates an extensive pipeline network for the transportation of crude oil and natural gas, three natural gas companies in the United States and renewable energy projects. Notably, Enbridge earns approximately 98% of its adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) from regulated assets and long-term contracts, protecting its financial results from market volatility.

Backed by these stable cash flows, Enbridge has paid dividends for 70 consecutive years and increased its dividend for 31 years in a row, currently offering an attractive forward dividend yield of 6%. Looking ahead, the company is continuing its $37 billion capital program, with projects expected to come online over the next four years. In addition to these expansions, higher asset utilization and continued system optimization should further strengthen profits.

With these growth initiatives in place, management expects to return between $40 billion and $45 billion to shareholders over the next five years. Given its regulated asset base, strong growth prospects and attractive returns, Enbridge appears to be an ideal addition to a TFSA portfolio.

Hydro One

Another reliable stock that I think is well suited for a TFSA is Hydro One (TSX: H), a pure-play electric transmission and distribution company with no exposure to power generation or commodity price fluctuations. Approximately 99% of operations are regulated, making financial performance less sensitive to market volatility and economic cycles and delivering stable, predictable results. Since 2017, Hydro One has grown its rate base at a compound annual growth rate (CAGR) of 5.1%, supporting steady financial growth. This performance has given the stock a total return of over 118% over the past five years, for an annualized return of 18.8%.

Looking ahead, electricity demand is expected to rise, driven by economic growth, the electrification of transportation and increased investment in AI-enabled data centers. To capitalize on these trends, Hydro One is actively expanding its asset base through an $11.8 billion capital investment plan, allowing its interest base to grow approximately 6% per year to $32.1 billion by 2027. Supported by these investments, management expects earnings per share will grow at a CAGR of 6 to 8% until 2027, enabling dividend growth of approximately 6% per year.

Hydro One has increased its dividend at a CAGR of 5.3% since 2017, while the forward dividend yield is 2.5%. Given its regulated business model, visible growth trajectory and reliable revenue stream, Hydro One appears to be an excellent addition to a TFSA portfolio.