DOL:CC - 3 Growth Stocks for a Solid Tax-Free Retirement Income

2023-10-27 19:00:00 ET

Considering the retirement income available through programs like Old Age Security (OAS) and the Canada Pension Plan (CPP), retiring in Canada can be a great thing. However, these pension programs are only designed to fulfill your retirement income requirements partially. Using a sound retirement plan , Canadians can set themselves up for a comfortable life in their golden years.

With the combination of a sound strategy and using your Tax-Free Savings Account (TFSA) contribution room, you can create a sizeable nest egg to fund your retirement. While there are several ways to utilize the TFSA for retirement planning, we will focus on wealth growth through tax-free capital gains.

By allocating money to growth stocks with the potential to deliver multi-bagger returns in the long run, you can raise the funds necessary for a comfortable retirement. Today, we will discuss three growth stocks you can consider for this purpose.

Constellation Software

Constellation Software ( TSX:CSU ) is a $58.94 billion market capitalization diversified software company. Founded by a former venture capitalist, CSU primarily acquires software companies poised for growth. It then lends its expertise to grow the company, in turn benefitting itself and growing shareholder value. It is a rare example of stable growth in an otherwise volatile sector.

As of this writing, it trades for $2,781.31 per share; analysts believe it is fairly valued. Having delivered over 30% in annualized returns in the last decade, it can be an excellent investment to hold for a retirement nest egg in a TFSA.

goeasy

goeasy ( TSX:GSY ) is a $1.83 billion market capitalization company headquartered in Mississauga. The alternative financial services company offers financing to borrowers who cannot secure loans through traditional lenders. It also offers unsecured installment loans to consumers. With the economy so uncertain, the company is well-positioned to generate healthy cash flows.

Its business model has worked for years. Since 2014, it has managed to raise its payouts at a compound annual growth rate (CAGR) of around 31%.

It means that besides delivering growth through capital gains, it offers quarterly payouts that can line your account balance with extra cash while keeping outpacing inflation. As of this writing, goeasy stock trades for $110.16 per share and offers payouts at a 3.49% dividend yield.

Dollarama

Dollarama ( TSX:DOL ) is a stock that might warrant a place in your TFSA portfolio in any market environment. The $27.15 billion market capitalization company is headquartered in Montreal, running the largest discounted retail store chain in Canada. Generating solid cash flows when the economy is booming, its business model also works wonders when consumers want to cut spending.

By offering necessary goods at heavily discounted rates, it offers a cost-effective alternative for consumers who need to meet their needs on a tight budget. As of this writing, Dollarama stock trades for $96.06 per share, up by just over 20% year to date. Outpacing the entire stock market by a margin, Dollarama stock can be an excellent buy-and-hold investment for long-term financial goals.

• We just revealed five stocks as “best buys” this month … join Stock Advisor Canada to find out if Dollarama Inc. made the list!

Foolish takeaway

Using your TFSA contribution room wisely, you can achieve most of your long-term financial goals. By allocating some of it to long-term growth stocks, you can grow the value of your investments without incurring taxes. By the time you hit retirement, you can reposition your investments in the account to generate tax-free passive income through dividend stocks.

To this end, Constellation Software stock, goeasy stock, and Dollarama stock can be excellent investments.

The post 3 Growth Stocks for a Solid Tax-Free Retirement Income appeared first on The Motley Fool Canada .

Fool contributor Adam Othman has no position in any of the stocks mentioned. The Motley Fool recommends Constellation Software. The Motley Fool has a disclosure policy .

2023