2 Dividend Stocks I Just Bought With My TFSA Contribution

Still looking to invest your TFSA contributions? You’re not alone. I just bought Cineplex Inc. (TSX:CGX) and another stock that offers solid upside potential.

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Yes, it’s April, and I still have TFSA contribution room remaining. There’s no need to rush and use up all the TFSA contribution room that you may have accumulated. Essentially, that’s $6,000 from this year and any withdrawals from previous years that you haven’t contributed back.

However, when there are great stock-buying opportunities available, you’ve got to take them. I believe these two dividend stocks may pleasantly surprise investors over this year or the next.

Here’s how.

Cineplex (TSX:CGX)

There has been a lot of negative sentiment around Cineplex stock lately. Do you recall that the stock traded at above the $50-per-share level as recently as June 2017? That was about 21 times cash flow, which was way too expensive.

Fast forward to today and Cineplex stock has lost more than half of its value. Thanks to the substantial stock decline and cash flow growth, Cineplex now trades at a much cheaper cash flow multiple of about 7.3 at $24.35 per share as of writing.

Moreover, the stock offers a high yield of 7.15%, which is supported by a recent adjusted free cash flow payout ratio of about 61%.

There’s a clear value proposition in Cineplex. When the stock’s sentiment turns positive from a potentially enthusiastic reception for its movie slate, Cineplex can trade at more normalized levels in the $35-40 range over the next two years, which represents more than 43-65% upside potential.

Combining the upside with the monthly dividend and an investment in Cineplex stock today can lead to total returns of about 57-80% over the next two years!

Value for money

Brookfield Business Partners (TSX:BBU.UN)(NYSE:BBU)

Brookfield Asset Management’s (BAM) newest spinoff is Brookfield Business Partners, which began trading on its own in mid-2016. It is essentially BAM’s flagship vehicle for investing in the business services and industrials sectors.

Particularly, BAM has been doing this as a proven, highly profitable business for more than 30 years. It looks for global opportunities to invest in businesses that are low-cost producers, have high barriers to entry, or provide opportunities for operational improvements.

Sometimes these businesses aren’t profitable, but that’s where BAM’s operational expertise can generate value. BAM improves the businesses substantially and sells them for hefty profits. For example, BBU announced last month it would sell a $1 billion global facilities management business, of which it holds a controlling interest in.

BBU is BAM’s only listed partnership that aims for high 15-20% return on investments, which means that it can generate some serious money for long-term investors in a TFSA.

I believe BBU has already started its turnaround since the new year. However, the stock is still meaningfully (about 16%) off from its 2018 and all-time high. So, it remains a great growth idea for accumulation.

It’s difficult to value BBU stock because of its ongoing strategy to buy and sell businesses. Currently, Scotiabank has a one-year target of US$46 on the stock, which represents market-beating upside of 20% in the near term.

Investor takeaway

Investors shouldn’t feel the rush to max out their TFSA immediately at the start of every year. It’ll do good for you to take your time, waiting for the right investment opportunities for your tax-free portfolio.

Currently, I believe Cineplex and Brookfield Business Partners to be excellent dividend stocks to buy. Investors should do their own due diligence to see if the stocks make sense for their portfolios or trading strategies.

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 Kay Ng has shares of Brookfield Asset Management, Brookfield Business Partners, Bank of Nova Scotia, and Cineplex. The Motley Fool owns shares of Brookfield Asset Management, BROOKFIELD ASSET MANAGEMENT INC. CL.A LV, and BROOKFIELD BUSINESS PARTNERS LP. Bank of Nova Scotia is a recommendation of Stock Advisor Canada.

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