Although the S&P/TSX composite index continues to reach new highs, concerns about high valuations, the impact of ongoing trade tensions on global economic growth and the possibility of an AI-powered bubble persist. In this environment, I believe investors should focus on companies with strong underlying businesses, robust cash flows and sustainable growth prospects to complement their TFSA. Against this backdrop, here are my two top picks, each with a proven track record and healthier long-term growth potential.
Dollarama
Dollarama (TSX:DOL) is a leading discount retailer that continues to attract strong customer traffic even in challenging economic conditions. Supported by its superior direct-sourcing model and highly efficient logistics network, the Montreal-based retailer offers a wide range of consumer products at attractive prices, driving consistently healthy sales. Over the years, Dollarama has expanded its store base from 652 locations in fiscal 2011 to 1,684 stores in Canada and 401 stores in Australia. This steady expansion, combined with robust same-store sales growth, has led to strong top and bottom line performance and generated solid shareholder returns. Over the past ten years, the stock has delivered a cumulative return of approximately 685%, which translates into an impressive annualized return of 22.9%.
Looking ahead, Dollarama plans to expand its Canadian store network to 2,200 locations and its Australian presence to 700 stores by the end of fiscal 2034. Given the efficient low-capital model, the rapid increase in sales, the short payback periods and the relatively low maintenance investments, these expansions are well positioned to further improve profitability. In addition, Dollarama owns a 60.1% stake in Dollarcity, which operates 683 stores in five Latin American countries and aims to expand its network to 1,050 stores by the end of fiscal 2031. Dollarama also has an option to increase its stake in Dollarcity by 9.89% by the end of 2027, which could further increase its profit contribution.
With multiple growth engines across different regions, Dollarama can deliver superior long-term returns, making it an attractive addition to a TFSA-focused portfolio.
Fortis
Fortis (TSX:FTS) is another stock that I view as an ideal addition to a TFSA, supported by its regulated asset base and low-risk transmission and distribution business. With 94% of assets linked to regulated transportation and distribution activities, Fortis’s revenues are largely insulated from market volatility, allowing the company to generate stable and predictable financial results across economic cycles. Backed by this resilience, the utility has delivered a total return of 183.5% over the past decade, for an annualized return of 11%. Furthermore, the company has rewarded shareholders with 52 consecutive years of dividend increases and currently offers an attractive dividend yield of 3.65%.
On the growth front, Fortis invested $4.2 billion in the first three quarters of the year and remains on track to achieve its full-year capital investment target of $5.6 billion. Looking ahead, management plans to deploy $28.8 billion of capital over the next five years, which is expected to increase the interest base at a compound annual rate of 7% to $57.8 billion through 2030. This disciplined investment program should support steady earnings growth while supporting management’s plan to increase dividends by 4-6% annually through 2030.
#TFSA #TSX #shares #contribution