Once in a while, investors come across a bit of extra cash.
The windfall could be from a bonus at work, a repositioning of the portfolio, or the result of a very successful garage sale.
Regardless of the source, one way to put the cash to work is to buy dividend stocks inside the TFSA.
Let’s take a look at Telus Corporation (TSX:T)(NYSE:TU) and Fortis Inc. (TSX:FTS)(NYSE:FTS) to see why they might be attractive picks.
Telus
Telus is one of Canada’s communications giants and has a long history of rewarding investors with growing dividends and share buybacks.
Critics of the company say the lack of a media business could turn out to be a negative over the long term. Time will tell on that front, but the company appears to be doing just fine.
In fact, avoiding the temptation to dump billions of dollars into TV assets and sports teams could prove to be the wise choice, as new pick-and-pay rules in the Canadian TV space put extra pressure on content owners.
Telus has a strong commitment to customer service and is investing heavily in its wireless and wireline networks. Those efforts are paying off with rising subscriber numbers in the TV, internet, and mobile segments.
The company regularly reports the lowest post-paid mobile turnover rate in the industry, and its mobile customers have spent more money for 24 straight quarters on a year-over-year basis.
Telus also has an interesting business in the health sector. Telus Health is a leading provider of digital solutions to doctors, hospitals, and insurance companies. As the business grows, investors could see the division become a more substantial contributor to earnings.
Telus pays a quarterly dividend that yields 4.5%.
Fortis
Fortis owns power generation, transmission, and natural gas distribution assets in Canada, the United States, and the Caribbean.
The company completed its US$11.3 billion acquisition of Michigan-based ITC Holdings Corp. last year. This came just two years after the company spent US$4.5 billion for Arizona-based UNS Energy.
Management expects additional cash flow growth from the purchases to support annual dividend increases of at least 6% through 2021.
Fortis gets most of its revenue from regulated assets, so investors can feel reasonably comfortable with the guidance.
The current dividend provides a yield of 3.8%. Fortis has raised the payout every year for more than four decades.
Is one more attractive?
Both stocks should be solid TFSA picks.
Telus offers a better yield, but growth prospects might be more attractive at Fortis in the medium term. In addition, Fortis provides strong exposure to the U.S. market.
If you only choose one, I would probably make the power company the first pick today.
