A Tax-Free Financial savings Account (TFSA) permits buyers to earn tax-free returns – together with each capital appreciation and dividend earnings – on investments made inside the prescribed contribution limits. Nevertheless, buyers should train warning when investing by a TFSA, as losses on TFSA-held investments and subsequent promoting can’t solely erode capital but additionally completely cut back obtainable contribution room.
Amid heightened volatility in Canadian fairness markets – pushed by ongoing geopolitical tensions and uncertainty surrounding the affect of protectionist financial insurance policies on international development – I consider buyers ought to preserve a balanced method by combining development, defensive, and dividend shares to optimize long-term return potential.
In opposition to this backdrop, listed here are my three high picks.
Celestica
Celestica (TSX:CLS) can be a wonderful development inventory so as to add to a TFSA, given its publicity to the high-growth synthetic intelligence (AI) market. As companies transition from pilot AI initiatives to embedding AI throughout core operations – and as people more and more undertake AI-powered instruments – the demand for computing energy continues to rise. To fulfill this rising demand, hyperscalers are accelerating investments to develop information centre capability, making a compelling long-term development runway for Celestica.
Capitalizing on these business tailwinds, the corporate is concentrated on launching progressive, higher-value merchandise to strengthen its aggressive place. Supported by its robust fourth-quarter efficiency, administration raised its 2026 steering, projecting income and adjusted earnings per share development of 37.2% and 44.6%, respectively. Furthermore, following a current pullback, the inventory is buying and selling at greater than an 18% low cost to its all-time excessive, providing a sexy entry level for long-term, growth-oriented TFSA buyers.
Hydro One
Given its pure-play electrical energy transmission and distribution enterprise and minimal publicity to commodity costs, Hydro One (TSX:H) stands out as a wonderful defensive addition to a TFSA. Roughly 99% of the corporate’s operations are rate-regulated, which shields its monetary efficiency from market volatility and allows it to generate steady, predictable money flows. Supported by this regulated construction, the regular enlargement of its charge base at a compound annual development charge of 5.1% since 2017 has strengthened monetary efficiency and supported constant share value appreciation. Over the previous 5 years, Hydro One has delivered whole returns of roughly 120%, translating into an annualized return of about 17%.
Wanting forward, rising electrical energy demand pushed by ongoing electrification, the enlargement of AI-ready information centres, and broader financial development continues to develop Hydro One’s addressable market. To capitalize on these tendencies, the utility is advancing a $11.8 billion capital funding plan, which may develop its charge base at an annualized charge of 6% to $32.1 billion by 2027. Alongside this enlargement, administration expects adjusted earnings per share to develop at a 6%–8% annualized charge by 2027, whereas additionally focusing on dividend development of roughly 6% per yr.
Enbridge
Enbridge (TSX: ENB) is a superb dividend inventory so as to add to a TFSA, supported by its contracted enterprise mannequin, robust money flows, and enticing yield. Roughly 98% of the corporate’s adjusted EBITDA (earnings earlier than curiosity, taxes, depreciation, and amortization) is generated from long-term contracts and controlled belongings, whereas about 80% is inflation-indexed. This construction offers Enbridge with extremely steady and predictable money flows, enabling the corporate to pay and develop its dividend constantly. Enbridge has paid dividends for greater than 70 years and has elevated its payout for 31 consecutive years. Its quarterly dividend of $0.97 per share will translate right into a ahead yield of roughly 5.7%.
Wanting forward, Enbridge has recognized almost $50 billion in development alternatives by the rest of the last decade and plans to assist these initiatives with about $10 billion in annual capital investments. Alongside these development tasks, administration expects to return $40–$45 billion to shareholders over the subsequent 5 years by dividends and buybacks. Given its sturdy development pipeline and powerful money stream profile, Enbridge seems well-positioned to maintain dividend development, making it a compelling addition to a balanced TFSA portfolio.