Young Investors: 2 Dividend Stocks to Buy and Hold in Your TFSA for Decades

Here’s why BCE Inc. (TSX:BCE)(NYSE:BCE) and Bank of Montreal (TSX:BMO)(NYSE:BMO) should be on your TFSA radar.

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The TFSA is a great vehicle to help millennials save a pile of money for retirement.

How does it work?

The secret lies in the power of compounding. When savers pick top dividend-growth companies and reinvest the distributions in new shares, they unleash a process that can turn a relatively small initial investment into a substantial retirement nest egg.

The more years you have, the better the plan works, so young investors really have a big advantage.

Let’s take a look at BCE Inc. (TSX:BCE)(NYSE:BCE) and Bank of Montreal (TSX:BMO)(NYSE:BMO) to see why they are good TFSA picks.


BCE has long been a favourite among retirees who count on the generous and reliable dividends for extra income.

These attributes also make the stock great for building long-term growth, and young investors should get in on the action.

BCE has changed significantly in recent years, and the shift from being a simple telephone company to a communications and media powerhouse is proving to be a wise one.

BCE now owns sports franchises, a television network, specialty TV channels, retail outlets, radio stations, and an advertising business.

When you combine these assets with the world-class national wireless and wireline network infrastructure, you get a business that touches the lives of most Canadians on a weekly, if not daily, basis.

Think about it. Any Canadian who sends a text, downloads a movie, watches the news, listens to the weather report, or logs in to an e-mail account very likely interacts with a BCE product or service at some point along the way.

That’s a powerful business.

BCE continues to invest billions in its infrastructure to ensure it maintains a competitive edge. With very few serious players in the Canadian market, BCE is well positioned to dominate for decades.

The business throws off a ton of free cash flow, and management does a good job of sharing it with investors. The current dividend offers a 4.6% yield.

A $10,000 investment in BCE just 10 years ago would now be worth $34,000 with the dividends reinvested.

Bank of Montreal

Bank of Montreal offers a balanced revenue stream that makes it appealing in the current environment. The business has strong Canadian retail, capital markets, and wealth management operations, but the real attraction in the revenue mix is the company’s growing U.S. business.

Bank of Montreal operates more than 500 U.S. branches primarily located in the Midwest. Earnings have grown steadily on the back of strong commercial banking activities, and the recent acquisition of GE Capital’s transport finance business should ensure the trend continues.

The strong U.S. dollar is also helping boost results when converted to Canadian currency.

Bank of Montreal has paid investors a dividend every year since 1829 and the current distribution yields 4.1%.

A $10,000 investment in Bank of Montreal 20 years ago would be worth $116,000 today with the dividends reinvested.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Andrew Walker has no position in any stocks mentioned.

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