Should You Put TransCanada Corporation or Bank of Montreal in Your TFSA?

Canadian investors are searching for quality companies to put inside their TFSA portfolios.

The move makes sense for all investors, but those seeking ways to boost their income can really benefit, as all the distributions paid inside the TFSA remain yours to keep. That’s right; the taxman doesn’t get any of the spoils.

Let’s take a look at two Canadian stocks that might be interesting picks today.

TransCanada Corporation (TSX:TRP)(NYSE:TRP)

TransCanada purchased Columbia Pipeline Group last year in a deal that added important assets in the Marcellus and Utica shale plays, as well as strategic pipeline assets, including a network that runs from Appalachia to the Gulf Coast.

The deal also provided a nice boost to the near-term capital plan, which stood at $24 billion at the end of the second quarter.

As the new assets are completed and go into service, TransCanada expects cash flow to improve enough to support annual dividend growth of at least 8% through 2021.

The company has a strong track record of raising the payout, so investors should feel comfortable with the guidance.

In addition, TransCanada is evaluating its options on the Keystone XL pipeline, which is back in play under the Trump administration. If Keystone gets the green light, investors could see an upward revision in the dividend-growth outlook.

The stock currently offers a yield of 4%.

Bank of Montreal (TSX:BMO)(NYSE:BMO)

Investors often overlook Bank of Montreal when searching for a financial stock to put in their portfolios, but the company probably deserves more respect.


The bank has a balanced revenue stream, with strong personal and commercial, wealth management, and capital markets operations. The U.S.-based business, which includes more than 500 branches, provides a nice hedge against potential weakness in the Canadian economy.

Bank of Montreal has a long history of sharing the profits with shareholders. In fact, the bank has paid a dividend every year since 1829.

The stock has enjoyed a nice rally in the past month, but new investors can still pick up a solid 3.6% yield.

Is one more attractive?

Both stocks should be strong picks for a buy-and-hold income portfolio.

However, TransCanada likely offers better dividend-growth prospects in the medium term, and the stock might be a bit oversold, so I would probably make the pipeline giant the first choice today.

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

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