TFSA Investors: 3 CPP Portfolio Stocks to Build Your Own Pension!

If you want to build your own TFSA pension to supplement CPP, stocks like Fortis Inc (TSX:FTS)(NYSE:FTS) can be great choices

| More on:
A golden egg in a nest

Image source: Getty Images.

Do you want to build a personal pension in your TFSA that pays you tax-free income through your retirement?

The CPP Investment Board (CPPIB)’s portfolio is a great place to start. The CPPIB invests in a variety of assets, including stocks, real estate and private equity investments.

The stocks portion of the CPP portfolio can be replicated by any investor willing to do their research.

The CPP portfolio is specifically designed to provide solid but relatively safe returns for Canada’s national pension plan. Naturally, it’s highly concentrated on large cap stocks that you can count on for average to slightly above average returns.

The entire CPP portfolio includes thousands of stocks, which would render it difficult to replicate in its entirety. However, the following three large caps make up an outsized percentage of the fund’s weightings and may make solid retirement investments for your TFSA. Note that the CPP Board does not provide stock recommendations and the emphasis placed on these three particular stocks is my own.

Canadian National Railway

Canadian National Railway (TSX:CNR)(NYSE:CNI) is Canada’s largest railway company, a freight shipping behemoth that touches three coasts. Because of its huge service area, which crosses North America, it has a competitive advantage in long distance shipping.

Over the years, CN has outperformed the TSX, thanks in no small part to phenomenal growth in its crude-by-rail business. If Canada’s many delayed pipeline projects eventually go ahead, that could spell trouble for CN, but for the next few years its crude shipping business should be safe.

This year, CN’s shipments are down due to a softening of the economy. However, when the economy picks up again, the company should return to solid growth.

Toronto-Dominion Bank

The Toronto-Dominion Bank (TSX:TD)(NYSE:TD) is a Canadian bank that punches way above its weight in the United States. Thanks to its high growth U.S. retail business and TD Ameritrade investment, it’s growing more than other Canadian banks.

In most quarters, TD posts earnings growth in the 5-10% range. This is solid for a big Canadian bank, as most of TD’s competitors are growing at just 2-3% year over year. It all comes down to the U.S. operations.

The U.S. is a far larger financial services market than Canada, which gives TD a lot of room to grow in that country. TD’s brokerage operations are currently facing challenges from the no-fee trading trend, but in the long run, the bank should be able to make up for the loss of trading fees with increased advisory and research services.

Fortis

Fortis Inc (TSX:FTS)(NYSE:FTS) is one of Canada’s largest utility companies, with operations in Canada, the U.S. and the Carribbean.

Over the years, Fortis has solidly outperformed both the TSX and the TSX Utilities Sub-Index thanks to its investments in growth and acquisitions. The company also has the distinction of having raised its dividend every single year for 46 years straight.

Fortis is currently embarking on a $18.3 billion capital expenditure program aimed at increasing its rate base. The expenditures will go toward upgrading aging infrastructure and increasing service area. This program will increase the company’s debt, but should also boost revenue if the anticipated rate base increase materializes.

Fortis shares pay a dividend that yields 3.6% at current prices. Management plans to raise the dividend by 6% a year for the next five years.

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 Andrew Button owns shares of Canadian National Railway and TORONTO-DOMINION BANK. David Gardner owns shares of Canadian National Railway. The Motley Fool owns shares of and recommends Canadian National Railway. The Motley Fool recommends Canadian National Railway. Canadian National Railway is a recommendation of Stock Advisor Canada.

More on Dividend Stocks

Two seniors float in a pool.
Dividend Stocks

TFSA: How to Earn $1,890 in Annual Tax-Free Income

Plunk these investments into your TFSA to earn passive income and avoid the taxman.

Read more »

Engineers walk through a facility.
Dividend Stocks

1 TSX Stock I Wouldn’t Touch With a 10-Foot Pole

AtkinsRéalis (TSX:ATRL) is one TSX stock I'd never invest in.

Read more »

edit Woman in skates works on laptop
Dividend Stocks

3 No-Brainer Stocks to Buy Under $30

These three stocks all offer a huge deal for investors looking for dividends, as well as growth that will last.

Read more »

You Should Know This
Dividend Stocks

How to Convert a $300 Monthly Investment Into $338 in Monthly Income

If you want a certain amount in monthly passive income, invest a similar amount today and leave the rest to…

Read more »

Increasing yield
Dividend Stocks

3 Income Stocks With Big Yields to Consider in April 2024

If you haven’t yet made your March investments, here are three income stocks to buy the dip and lock in…

Read more »

Senior Man Sitting On Sofa At Home With Pet Labrador Dog
Dividend Stocks

RRSP Investors: Don’t Miss Out on This Contribution Hack!

This hack has so many benefits for you -- not just when you put it in your RRSP but for…

Read more »

A red umbrella stands higher than a crowd of black umbrellas.
Dividend Stocks

Passive Income: 2 Safe Dividend Stocks to Own for the Next 10 Years

Dividend stocks such as Manulife and Fortis can help you generate a stable and recurring passive-income stream.

Read more »

Young woman sat at laptop by a window
Dividend Stocks

3 Dividend Stocks Everyone Should Own for the Long Haul

For investors looking for top-tier dividend stocks to buy and hold for the long term, here are three of my…

Read more »