Saving money is a desire, but fulfilling that financial goal could be a struggle. That is a real-life dilemma especially if you’re worried about your financial future. Fortunately, there is the Tax-Free Savings Account (TFSA) that can aid you to save for the future and do away with the pressure.
Many Canadians find saving money a very difficult task. The younger generation in particular has not fully grasped the concept of investing before spending. Overspending or accumulating debts mean financial dislocation and financial disaster in the future. People who have stable employment have all the opportunities to save. The earlier you can save and invest, the better you can secure your future. A greater majority understands the importance of saving. However, they lack the motivation to start the practice.
If you’re relatively young and have about 20 years or more before retirement, you can invest in dividend stocks. This is the recommended investment strategy of retirement planners. By the time you reach the desired retirement age, you’ll get to enjoy the fruits of your saving and investing activities.
For more clarity, let us look at two dividend stocks. Bank of Nova Scotia (TSX:BNS)(NYSE:BNS), or Scotiabank, and TransAlta Renewables (TSX:RNW) are popular with dividend investors and would-be retirees. The stocks can be the core holdings in your TFSA portfolio.
Consummate bank stock
“Money in the bank” is not a just a metaphor if you’re investing in a well-established banking institution like Scotiabank. You can buy the bank stock now and hold it forever. That’s how a high-quality investment should be.
The $85.25 billion bank is a pillar in the Canadian banking industry and banking stalwart in North America, Central America, Latin America, and the Caribbean. Scotiabank has been steadily increasing revenue year in and year out. This year, revenue is projected to hit $26.7 billion and increase to $28.5 billion in 2020.
But the real beauty of the bank stock is the annual dividend yield of nearly 5% with a corresponding payout ratio of 50.6%. This means Scotiabank can decide to further hike the annual dividend and reward investors with more gains and more opportunities to reinvest the dividends.
TransAlta Renewables is currently trading at a cheap price of $13.85. The $3.6 billion independent power producer (IPP) is an outstanding choice if you want to grow your cash reserves for the future.
Don’t expect a significant price increase, but you can partake of the high 6.8% annual dividend yield. TransAlta has developed the company assets from the ground up and has transformed into a diversified IPP.
I can stop short of saying that TransAlta Renewables can deliver extra-large returns after a considerable holding period. There’s a long runway for growth, which should be pleasing to prospective investors. Start saving up and buy the shares. The more you have, the more you gain.
You can end your saving struggles by investing in bankable and great dividend stocks.
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Fool contributor Christopher Liew has no position in any of the stocks mentioned. Bank of Nova Scotia is a recommendation of Stock Advisor Canada.