Canadians are exploring ways to create retirement funds to go along with their company and government pensions.
Where should you invest?
Buying an income property was a popular strategy in the past two or three decades, and people can still make that work, but the project requires significant time and cash reserves to ensure the venture is a success.
Art, wine, and vintage cars are other alternative investments that can pay off handsomely. Going this route, however, also takes up significant time, storage space, and you need to have specific knowledge of the respective market to avoid losing your shirt.
Investors who are not DIY fanatics or hobby specialists might want to consider another option.
Using a self-directed TFSA to hold quality stocks might be an easier way to build retirement wealth. Inside the TFSA the dividends and capital gains are protected from the taxman. Ideally, you want to hold the positions for decades and use the distributions to buy new shares to take advantage of the power of compounding.
Let’s take a look at three stocks that might be interesting picks to get you started.
Royal Bank of Canada
Royal Bank of Canada (TSX:RY)(NYSE:RY) generated more than $12 billion in profits in fiscal 2018, and the company is targeting annual earnings-per-share growth of 7-10% over the medium term.
The banking sector isn’t without risk. Disruption is occurring as non-bank tech giants in the retail, social media, and telecom space leverage their vast client connections to try to take a chunk of the market.
New entrants will take a small piece of the pie, but concerns that that banks will be made redundant are overblown. Royal Bank is investing heavily to beef up its digital presence, and the company has the resources to remain competitive and the scale to forge important partnerships.
The dividend should continue to grow in line with expected earnings gains. Investors who buy today can pick up a yield of 3.9%.
Waste Connections (TSX:WCN)(NYSE:WCN) specializes in the removal, transfer, and disposal of garbage and recycling waste for residential and commercial customers. The company has operations in Canada and the United States and continues to expand through acquisitions.
Consolidation is expected to continue in the industry, and Waste Connections should be a top player in the market. The company generates solid free cash flow and raised the dividend by 14% last year.
If you are looking for a recession-resistant stock to buy and sit on for 30 years, Waste Connections deserves to be on your radar.
Fortis (TSX:FTS)(NYSE:FTS) owns power generation, electric transmission, and natural gas distribution businesses in Canada, the United States, and the Caribbean. The utility company gets most of its revenue from regulated assets, which means the cash flow tends to be reliable and reasonably predictable over the long term.
Fortis has a strong management team that does a good job of growing the business through a combination of acquisitions and organic developments. The company has raised the dividend every year for more than four decades and intends to increase the payout by an average rate of 6% per year through 2023.
The existing distribution provides a yield of 3.4%.
The bottom line
Royal Bank, Waste Connections, and Fortis are all strong companies that should deliver solid long-term growth for decades. If you are searching for buy-and-hold stocks to put in a TFSA retirement fund, these three should be sleep-easy picks for your portfolio.
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Fool contributor Andrew Walker has no position in any stock mentioned.