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

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 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%.


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.

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

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