Canadian growth stocks with strong fundamentals could be particularly attractive in this context. These are companies that are consistently growing their revenue and profits at a strong pace. Value also plays an important role. For TFSA investors with a long-term mindset, value stocks offer opportunities to buy solid companies at a discount. Another effective approach is to look for companies that offer both growth and income. Over time, companies with these characteristics are more likely to deliver returns that outperform the broader market, making them well-suited for long-term wealth creation in a TFSA.
The TFSA structure increases this possibility even further. Because both capital gains and dividend income are completely tax-free, every dollar of return remains invested and continues to grow.
Against this backdrop, here are three TSX stocks to improve the returns of your TFSA portfolio.
TFSA Growth Stocks: Aritzia
Aritzia (TSX:ATZ) is a Canadian growth stock to add to your TFSA portfolio. The fashion retailer has consistently delivered solid growth, driven by strong product demand, frequent new collections, a highly loyal customer base and the expansion of its physical and digital footprint.
Since fiscal year 2020, Aritzia has achieved double-digit growth in both revenue and profit. Aritzia’s revenues have grown at a compound annual growth rate (CAGR) of 23%, while profits have grown at a CAGR of 19%. The strong operating performance has translated into strong shareholder returns, with the stock up approximately 365% over the past five years.
While the recent rally has pushed valuations higher, Aritzia stock still has more upside potential. The growing footprint and brand momentum are likely to accelerate growth. Aritzia plans to expand its US boutiques at a healthy pace. Moreover, the digital business is performing well. While tariffs and logistics costs pose short-term challenges, operational efficiencies and supply chain improvements should help protect margins and thus support the company’s long-term growth.
TFSA Value Shares: MDA Space
MDA space (TSX:MDA) offers significant value near its current price level. Shares of this space technology company fell sharply after a major order for satellites was canceled. The headline spooked investors, but the underlying business remains intact, creating an entry point for long-term investors.
MDA is a leader in satellite systems, robotics and geo-intelligence, markets supported by rising global demand for data and increasing defense budgets. As space becomes a core national security priority and NATO renews its focus on space capabilities, MDA will benefit from long-term structural tailwinds.
The company’s strength in advanced satellite communications for broadband and 5G, along with growing demand for Earth observation and robotics, will support future growth. A solid order book and a solid balance sheet also provide a solid platform for future growth.
TFSA Growth and Income Stocks: Hydro One
TFSA investors might add Hydro One (TSX:H) stocks for stability, income and growth. The company operates regulated electricity transmission and distribution businesses, which help protect revenues from economic fluctuations and commodity price volatility. As a result, Hydro One generates predictable cash flows that support both the share price and dividends.
The steadily growing interest base has led to consistent dividend growth, which increased by about 5% per year between 2016 and 2022 and by about 6% in recent years. With the rate base expected to grow at approximately 6% per year through 2027, the company is expected to deliver steady earnings growth.
Furthermore, the expansion of transmission capacity, investments in grid modernization and the integration of renewable sources position Hydro One to benefit from increasing electricity demand and reward long-term investors with solid total returns.
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