Although the Tax-Free Savings Account (TFSA) was introduced a decade ago, it has become increasingly popular today. One of the ways that Canadian families are trying to utilize stocks is by buying and holding shares for years to accrue a substantial amount of wealth. Retirees are looking to bolster their retirement income through smart investments in TFSAs.
One of the best ways to utilize TFSAs for the long-term growth of wealth is to find low-stress stocks that you can add and forget about for the next few decades. Letting the healthy stocks sit in your TFSA can help you to collect a massive amount in tax-free earnings. The best thing about earnings in your TFSA is that you can withdraw them at any time whenever you need the money without paying taxes or penalties.
As 2020 begins, the government has increased the total contribution room in TFSAs by $6,000 to $69,500 per person. That amount is more than enough to give Canadians the chance to build a strong investment portfolio and generate reliable income for years without the need to risk OAS clawbacks.
I am going to discuss one dividend stock that you should consider buying and holding in your TFSA for years to earn substantial returns: Bank of Montreal (TSX:BMO)(NYSE:BMO).
The oldest financial institution in the country
Bank of Montreal is one of the oldest banks in Canada. BMO also has the longest-running dividend in the TSX Index. Investors who have had shares of the bank have received dividend payouts from the bank every year since 1829. That is an incredible streak of 190 years. In the two-century streak, the bank has managed to pay dividends through financial crises.
With such a long streak, I think it is safe to say that BMO stocks are reliable when it comes to paying shareholders. The bank has done a fantastic job of keeping up with the times over the years, diversifying its revenue stream and expanding to become one of the best financial institutions in the world.
BMO’s commercial banking operations remain strong, along with wealth management, capital market groups, and, of course, personal banking operations in the domestic segment. Canada’s operations in the U.S. also account for a large part of its revenue. With over 500 branches operating in the Midwest States, BMO Harris Bank has grown substantially over time.
Increasing dividends
Bank of Montreal has recently increased its quarterly dividend payments to $1.06 per share — a 6% increase in the past year alone. Fiscal 2019 was healthy for BMO, as it gained an adjusted net income by 5% in Q4 2019 year over year. Canadian banks faced headwinds from the falling interest rates and provisions for credit losses due to customers falling behind on payments.
BMO, however, managed to remain profitable due to its diverse operations. Reporting adjusted net earnings of $6.25 billion for fiscal 2019, BMO stock prices are up 14.08% from the start of the year at $101.12 per share.
Foolish takeaway
BMO operates in a healthy banking sector, and it remained profitable during recessions in the past. The bank pays a juicy 4.19% dividend yield, and it is looking strong going into 2020. I think Bank of Montreal is a serious contender for a company that you can invest in for the long term.
