Growth is not easy to come by when the global economy continually seems to be slowing down. Canada’s economy is doing better than most others around the world, but the headwinds have reached Canadian shores.
The local economy is on shaky grounds, and investors are looking at their holdings in TFSAs. They want to see if they have something in store to keep them insulated from the economic cycle.
Dividend-paying stocks are the likeliest to secure a better financial stance through challenging economic conditions for investors. Now it might seem like an odd thing to consider, but I’m going to talk about Constellation Software Inc. (TSC:CSU) as a stock you can consider holding in your TFSA.
Tech stocks are famous for a myriad of qualities, but dividends is not one of them. Most tech companies focus primarily on growth. If you’re an investor looking for the best capital gains, tech stocks across the board have proven themselves worthy time and time again. Investors who typically invest in tech stocks do not expect to earn money through dividends.
There are a select handful of tech companies that offer dividends to shareholders. Most of the companies do not provide high yields with dividends, but they distribute money to investors regularly.
Constellation Software is a tech company that doesn’t just offer substantial capital gains. The company is also generous with its dividends and provides excellent dividend growth.
Let’s take a better look at the company to see whether or not you should consider adding it to your TFSA to protect it from the rigors of a recession.
Constellation Software
Bring up any of the top charts for best performers on the TSX in terms of growth over the past 10 years and you’ll find Constellation stocks featured in every one of them.
That the stock also made it to the TSX 30 in 2019 isn’t surprising, and it has delivered a 50% return over the past 12 months. The company has a phenomenal growth of 4,951% since January 2019.
It’s safe to say that you are looking at a company that has maximized its growth potential. All the early investors are wealthier individuals right now so there’s no room for new people – or is there?
I won’t argue that the stock’s price of $1,300.83 per share at the writing is more than prohibitive. However, if you take a closer look at the business model for the company, it has virtually endless opportunities. The company can potentially even benefit from an inevitable — and fearful — market downturn.
CSU operates as a holding company for small enterprise software acquisitions. In simple terms, CSU is an investment fund focused on niche software providers. CSU is the company that will keep encouraging young and innovative companies by buying them out for a good deal and expanding its portfolio. They get the funding and CSU keeps growing.
A market downturn can see the company get better valuations for any acquisitions it has in its crosshairs – something to enhance CSU’s long-term growth. The company has plenty to keep it afloat through a recession, and the ability to expand through a recession gives it seemingly endless growth opportunities.
Foolish takeaway
The current dividend yield for CSU stocks is 0.41%. At $1,300.83 per share at writing, even that 0.41% pays a decent dividend payout to shareholders.
Holding stocks from CSU in your TFSA will give you exposure to massive capital gains even during a market downturn. Additionally, you can get some extra cash through its dividend payouts. I would consider it a potentially fantastic investment.
