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2 Top Canadian Dividend Stocks to Start Your TFSA

Canadian investors are looking for ways to save some cash for retirement.

One popular strategy is to own dividend-growth stocks inside a Tax-Free savings Account (TFSA) and invest the dividends in new shares.

This sets off a powerful compounding process that can turn a modest initial investment into a large nest egg over time.

Let’s take a look at BCE Inc. (TSX:BCE)(NYSE:BCE) and TransCanada Corporation (TSX:TRP)(NYSE:TRP) to see why they might be interesting picks.


BCE is a giant in the Canadian communications industry and keeps getting bigger.

The company recently closed its deal to buy Manitoba Telecom Services in a move that launches BCE into the top spot in the Manitoba market and gives BCE a strong base to expand its presence in the western provinces.

BCE also has significant media businesses, including sports teams, a television network, specialty channels, and radio stations.

These assets, when combined with the world-class wireless and wireline networks, create a powerful company that has the potential to interact with most Canadians on a weekly, if not daily, basis.

BCE generates significant free cash flow to support its healthy dividend. The current payout provides a yield of 4.8%.


TransCanada has also been on the acquisition trail with its 2016 purchase of Columbia Pipeline Group.

The deal added important strategic gas assets, including facilities in the growing Marcellus and Utica shale plays, as well as pipeline infrastructure running from Appalachia to the Gulf Coast.

TransCanada now has about $23 billion in near-term projects under development that should support annual dividend growth of at least 8% through 2020.

In addition, the Keystone XL mega-project is back in play, and that should provide additional cash flow growth over the medium term.

The stock isn’t as cheap as it was a year ago, but investors can still pick up a 4% yield.

Is one more attractive?

BCE provides a higher yield and tends to be less volatile when the broader market hits a rough patch. If you prefer a more conservative play, BCE is probably the better choice.

If you want exposure to the United States and can handle a bit of energy-related volatility, TransCanada is an attractive pick. The yield is a bit lower than BCE’s but the dividend-growth outlook over the medium term is probably better.

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

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