TFSA Investors: 2 Dividend-Growth Stocks That Yield up to 5.8%

Telus Corporation (TSX:T)(NYSE:TU) and Inter Pipeline Ltd. (TSX:IPL) are solid dividend picks. Is one a better bet right now?

| More on:
invest your money

Canadians are searching for reliable income stocks to tuck away inside their Tax-Free Savings Accounts (TFSA).

The strategy is a popular one, especially with retirees, as any income or capital gains earned inside the TFSA is yours to keep.

That’s right; none of it has to be handed over to the taxman.

Let’s take a look at Telus Corporation (TSX:T)(NYSE:TU) and Inter Pipeline Ltd. (TSX:IPL) to see why they might be interesting picks right now.

Telus

Telus enjoys a comfortable and profitable position in the Canadian communications market.

Critics of the stock say the company’s decision to avoid the media sector puts it at a disadvantage to its peers, but Telus doesn’t appear to be hurting.

In fact, the company continues to add new mobile, internet, and TV subscribers at a healthy clip and is expanding its presence across the country.

For example, Telus just added more than 100,000 new wireless subscribers and 15 dealer locations in Manitoba. The company acquired the assets for about $300 million as part of the BCE Inc. agreement to buy Manitoba Telecom Services.

Telus puts a strong focus on customer service, and that effort is paying off. The company enjoys the lowest postpaid mobile churn rate in the industry, and its mobile customers continue to spend more each quarter on a year-over-year basis.

On the strategy front, avoiding the media segment might actually prove to be a smart decision, as content owners continue to battle with Canada’s new pick-and-pay rules for TV subscriptions and competition from online streaming services.

Telus is investing in other initiatives, including its Telus Health division, which is a leader in the Canadian digital health market, providing solutions to doctors, hospitals, and insurance companies.

Telus has a strong track record of dividend growth. The current distribution provides a yield of 4.2%.

IPL

Investors often overlook IPL when searching for a dividend play in the energy infrastructure segment, but that might begin to change.

IPL owns a diversified group of businesses, including natural gas liquids (NGL) extraction assets, oil sands pipelines, conventional oil pipelines, and a liquids storage business that is based in Europe.

The company has taken advantage of the downturn in the oil sector to buy some attractive assets at discounted prices. For example, IPL bought two NGL extraction facilities and related infrastructure from The Williams Companies last year for $1.35 billion, which was far below the cost of building the plants.

IPL also has more than $3 billion in new projects under development that could be in service by the end of 2021. As a result, cash flow should grow enough to sustain continued dividend hikes.

The current monthly payout provides an annualized yield of 5.8%.

Is one more attractive?

Both stocks should be strong picks for an income-focused TFSA.

IPL offers a higher yield and might deliver better dividend growth over the medium term. As such, I would probably make the pipeline company the first choice today.

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.

More on Dividend Stocks

Two seniors float in a pool.
Dividend Stocks

TFSA: How to Earn $1,890 in Annual Tax-Free Income

Plunk these investments into your TFSA to earn passive income and avoid the taxman.

Read more »

Engineers walk through a facility.
Dividend Stocks

1 TSX Stock I Wouldn’t Touch With a 10-Foot Pole

AtkinsRéalis (TSX:ATRL) is one TSX stock I'd never invest in.

Read more »

edit Woman in skates works on laptop
Dividend Stocks

3 No-Brainer Stocks to Buy Under $30

These three stocks all offer a huge deal for investors looking for dividends, as well as growth that will last.

Read more »

You Should Know This
Dividend Stocks

How to Convert a $300 Monthly Investment Into $338 in Monthly Income

If you want a certain amount in monthly passive income, invest a similar amount today and leave the rest to…

Read more »

Increasing yield
Dividend Stocks

3 Income Stocks With Big Yields to Consider in April 2024

If you haven’t yet made your March investments, here are three income stocks to buy the dip and lock in…

Read more »

Senior Man Sitting On Sofa At Home With Pet Labrador Dog
Dividend Stocks

RRSP Investors: Don’t Miss Out on This Contribution Hack!

This hack has so many benefits for you -- not just when you put it in your RRSP but for…

Read more »

A red umbrella stands higher than a crowd of black umbrellas.
Dividend Stocks

Passive Income: 2 Safe Dividend Stocks to Own for the Next 10 Years

Dividend stocks such as Manulife and Fortis can help you generate a stable and recurring passive-income stream.

Read more »

Young woman sat at laptop by a window
Dividend Stocks

3 Dividend Stocks Everyone Should Own for the Long Haul

For investors looking for top-tier dividend stocks to buy and hold for the long term, here are three of my…

Read more »