Canadians are increasingly using their Tax Free savings Account (TFSA) as a tool to set some cash aside for their retirement years.
The 2019 TFSA contribution limit will be $6,000, which means that any Canadian resident who was at least 18 years old in 2009 will have as much as $63,500 in contribution room beginning in January. That is large enough to put together a nice portfolio of dividend growth stocks to launch a retirement fund.
The TFSA enables investors to reinvest the full value of the distributions in new shares, setting off a powerful compounding process that can grow reasonably small initial investments into a large portfolio over the course of two or three decades. When it comes time to cash out and enjoy the money, any capital gains are also tax-free.
Let’s take a look at three top Canadian dividend stocks that might be interesting picks right now to start your TFSA retirement portfolio.
Royal Bank just reported strong fiscal 2018 results. The company generated record net income of $12.4 billion, representing an 8% increase over fiscal 2017.
The company has a balanced revenue stream coming from a variety of segments in the industry. Wealth management earnings stole the show, rising 23% on a year-over-year basis, supported by higher net interest income as a result of rising interest rates, particularly in the United States.
The capital markets group delivered a 10% gain in earnings. Insurance earnings rose 7%, and personal and commercial banking profits increased 5%. Income from investor and treasury services were flat compared to 2017.
Royal Bank raised the dividend twice in the past 12 months for a total annualized increase of 8%. The current payout provides a yield of 4%.
Enbridge is North America’s largest energy infrastructure company with expansive natural gas and oil pipeline networks.
Management has launched a strategy shift that will make Enbridge more focused on regulated businesses. The company has already signed deals to monetize $7.5 billion in non-core assets and is simplifying its corporate structure through the buyback of its various subsidiaries.
The $22 billion in secured growth projects should drive revenue higher in the coming years and support annual dividend increases of at least 8% over the medium term.
Investors who buy today can pick up a 6% yield.
Telus is benefitting from the billions of dollars it has invested in network expansion and upgrades. The company generated operating revenue of $3.8 billion in Q3 2018, representing an 11% increase over the same period last year.
Telus added 187,000 new customers in the quarter and continues to see postpaid mobile churn rates below 1%.
The company just raised the quarterly dividend to $0.545 per share. This is the sixteenth dividend hike since 2011, and investors should see the steady trend continue as free cash flow rose 40% in the quarter compared to Q3 2017.
The dividend provides a yield of 4.6%.
The bottom line
Royal Bank, Enbridge, and Telus are leaders in their industries and operate strong businesses that continue to grow. If you are looking for stocks to anchor a TFSA retirement fund, these companies deserve to be on your radar today.
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Fool contributor Andrew Walker owns shares of Enbridge. Enbridge is a recommendation of Stock Advisor Canada.