In the world of investing, it's easy to get caught up in the latest trends and fads, but sometimes the most straightforward and effective strategies are the ones that are overlooked. One such strategy is maximizing the potential of your Tax-Free Savings Account (TFSA) by investing in high-quality, compound-growth stocks. And one of the best options for Canadians in 2026 is Dollarama (TSX:DOL).
Why Dollarama?
Dollarama is a discount retailer that has been quietly building its empire since 1992. What makes it particularly fascinating is its ability to thrive in a sluggish macro environment. As consumers grapple with inflation and cautious spending, Dollarama's discounted prices and everyday convenience become even more attractive. This is a business that operates on the principle of 'recession-resistant,' and it's a quality that TFSA investors should seek.
In fiscal 2026, Dollarama delivered impressive same-store sales (SSS) growth of 4.2% in Canada, while earnings per share grew by 14%. This is a testament to the company's ability to execute its strategy effectively. But what makes Dollarama truly stand out is its international expansion plans.
International Expansion
One of the most underappreciated aspects of Dollarama's story is its international expansion. Through a stake in Dollarcity, the company now operates across Latin America, with over 700 stores in Colombia, Peru, El Salvador, and Guatemala, plus a growing presence in Mexico. This is a bold move that could significantly boost the company's earnings and shareholder value. In fiscal 2026, Dollarama's share of Dollarcity's net earnings jumped more than 47% to $191.5 million, which is a clear indication of the success of this expansion.
But Dollarama's international ambitions don't stop there. In late fiscal 2026, the company acquired a national discount retail chain in Australia. This move is part of a long-term vision to establish a low-cost retail platform in Australia with over 500-600 stores. This is the kind of long-horizon thinking that TFSA investors should want from a core holding.
Dividend Growth
Dollarama also raises its quarterly dividend by 13.4% in fiscal 2026, which is a significant boost to long-term shareholder value. Dividend income in a TFSA is tax-free, which eliminates the need to calculate dividend tax credits entirely. This is a key advantage of investing in Dollarama, as it provides a steady stream of income that can compound over time.
Cost Management
Dollarama's cost management discipline is another reason why it's an attractive investment. The company has a number of levers to mitigate near-term cost impacts and will pass on price increases only where absolutely necessary. This is a steady, measured execution that long-term TFSA investors should be hunting for.
Conclusion
In conclusion, Dollarama is a high-quality, compound-growth stock that is well-positioned to benefit from a sluggish macro environment. Its international expansion plans, dividend growth, and cost management discipline make it an attractive investment for TFSA investors. So, if you have a $7,000 TFSA contribution limit, consider putting it to work in a business that compounds, pays a growing dividend, and gets stronger when the economy gets harder. Dollarama checks all the boxes.
