The Motley Fool

TFSA Alert: A Top Dividend Stock to Buy Now and Own for Decades

Image source: Getty Images

Planning for retirement can be a stressful process, but it doesn’t have to be that way.

Most Canadians will get their retirement income from a number of sources, including CPP and OAS payments, company pensions, and distributions from self-directed savings plans such as RRSPs and TFSAs. The government plans and the company pension pretty much look after themselves or require minimal personal decision making and oversight. Self-directed RRSP and TFSA portfolios can be a different story, and choosing which one to use first depends on the individual.

In recent years, the TFSA has emerged as a popular vehicle for setting cash aside for retirement. It makes particular sense for young investors who are early in their careers, as they can sandbag RRSP room for when they reach a higher marginal tax bracket. All income and capital gains generated inside the TFSA are tax-free, and the rules for making withdrawals enable people to tap the funds without worrying about a percentage held back for taxes in the event there is a financial emergency.

Since its launch in 2009, the contribution limit for the TFSA has grown to $63,500, which is large enough for people to start a meaningful retirement fund.

Let’s look at one stock that might be an interesting pick today to start the fund and can be held for 20-30 years.

Fortis

Fortis (TSX:FTS)(NYSE:FTS) is a North American utility company with electric transmission, gas distribution, and power generation businesses. The majority of the revenue comes from regulated assets, meaning the cash flow is normally quite predictable and reliable.

Growth comes as a result of strategic acquisitions and organic projects. Fortis made two large purchases in the United States in recent years and is working through a $17.3 billion capital program that should significantly increase the rate base through 2023.

As a result, Fortis plans to raise the dividend by an average of 6% per year over that time frame. The company has increased the payout for 45 straight years and the current distribution provides a yield of 3.4%.

Fortis has a low beta, which means it normally holds up well when the overall stock market gets hit. The nature of its businesses makes it relatively recession resistant and global financial or geopolitical instability shouldn’t have much of an impact on the company’s outlook.

In addition, Fortis gets more than half of its revenue from the U.S. operations, giving Canadian investors a good option for getting U.S. exposure through a Canadian company.

The bottom line

Fortis should be a top pick for TFSA investors who simply want to buy the stock and forget about it until they retire. The TSX Index is home to a number of other stocks that are also worth considering for investors who wish to build a self-directed wealth fund.

Just Released! 5 Stocks Under $49 (FREE REPORT)

Motley Fool Canada's market-beating team has just released a brand-new FREE report revealing 5 "dirt cheap" stocks that you can buy today for under $49 a share.
Our team thinks these 5 stocks are critically undervalued, but more importantly, could potentially make Canadian investors who act quickly a fortune.
Don't miss out! Simply click the link below to grab your free copy and discover all 5 of these stocks now.

Claim your FREE 5-stock report now!

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

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss an important event.

Iain Butler and the Stock Advisor Canada team only publish their new “buy alerts” twice a month, and only to an exclusively small group.

This is your chance to get in early on what could prove to be very special investment advice.

Enter your email address below to get started now, and join the other thousands of Canadians who have already signed up for their chance to get the market-beating advice from Stock Advisor Canada.

I consent to receiving information from The Motley Fool via email, direct mail, and occasional special offer phone calls. I understand I can unsubscribe from these updates at any time. Please read the Privacy Statement and Terms of Service for more information.