TFSA Investors: 3 Great Stocks Yielding Up to 8.3%

Great dividend stocks like Slate Retail REIT (TSX:SRT.UN) and National Bank of Canada (TSX:NA) would look great in any investor’s TFSA.

| More on:
Growth from coins

Image source: Getty Images

Many investors stick growth stocks inside their TFSAs, but I prefer a different approach.

I’d rather own dividend stocks in my TFSA, for a few important reasons. If you buy and hold a growth stock for a number of years, you can easily defer taxes by continuing to hold. It makes more sense to stuff your TFSA with dividend stocks, since dividends are taxable.

It is also part of creating a dividend portfolio that can eventually support me in retirement, which is a big part of my long-term investing goals.

If you’re interested in the same sort of thing, this article is for you. Here are three excellent dividend payers that would look good in your TFSA over the long term. These are stocks that look poised to continue their payouts for years – if not decades – to come.

Chorus Aviation

There are two parts to Chorus Aviation (TSX:CHR). The first, which isn’t terribly exciting, is a regional airline that operates flights for Air Canada. It generates fairly predictable cash flow, without much growth. The much more interesting part of the business is the airplane leasing division.

Here’s how it works. Chorus buys planes and then leases them back to regional airlines around the world. At the end of the lease period, Chorus is left with a plane that it can either lease again, sell, or add it to its own fleet. This business has grown by leaps and bounds since it was introduced in 2017; Chorus now has 60 planes leased to other airlines, and has agreements to lease additional aircraft to Air Canada.

In fact, Chorus is now the world’s second-largest aircraft leasing company.

All this growth should translate into impressive results this year, with analysts expecting the company to deliver $0.85 per share in earnings. Remember, Chorus shares trade hands at a little over $8 today, putting the company at less than 10 times forward earnings. This is also good news for the security of the company’s $0.04 per month dividend, which works out to a 5.9% yield.

Slate Retail REIT

For years now, Slate Retail REIT (TSX:SRT.UN) has traded at a far lower valuation than its peers. Although the stock is still cheap, this discount is beginning to change. If this trend continues, there’s significant upside potential.

Despite owning some of the most stable assets out there – U.S. real estate anchored by grocery stores – Slate trades for less than 9 times trailing funds from operations (FFO). Comparable REITs in Canada trade at around 15 times FFO, while similar U.S. REITs have an even higher valuation still.

So, what gives?

There are two reasons for this. Firstly, Slate’s balance sheet is a little stretched. It should pay down some debt. And secondly, investors don’t like Slate’s externally managed business model. I think both of these problems will get fixed over the long term.

In the meantime, investors can collect one of the safest 8.3% dividends out there. It has a payout ratio in the 70% range, which is better than many of its peers with lower dividend yields.

National Bank of Canada

After years of underperformance, National Bank of Canada (TSX:NA) has been an all-star lately. It trounced the rest of Canada’s big banks in 2019, delivering a total return of close to 30%.

While the rest of its peers are delivering tepid earnings growth – especially from their Canadian banking operations – National Bank is doing much better. It grew total earnings by 7% in its most recent quarter, with earnings per share increasing 9% thanks to a share buyback program. The company is also seeing decent growth in its mortgage division, which has been an area of weakness for most of its peers.

National Bank is also getting more serious about expanding outside Canada. Its foreign operations increased their bottom line by 28% over last year’s numbers, growing to about 10% of total earnings.

The company’s dividend, which has been raised each year for a decade now, currently yields 3.8%. With a payout ratio just over 40%, the stock is poised to continue delivering 5%–8% dividend growth annually for a long time.

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 Nelson Smith owns shares of SLATE RETAIL REIT and Chorus Aviation Inc. 

More on Dividend Stocks

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 »

Golden crown on a red velvet background
Dividend Stocks

Dividend Royalty: 3 Fabulous Stocks to Buy Now for Decades of Passive Income

Rogers Communications stock and Canadian Natural Resources stock could pay you dividends for decades to come.

Read more »

Payday ringed on a calendar
Dividend Stocks

3 Dividend Stocks That Pay Me More Than $54.57 Per Month

These three dividend stocks have done me well over the years, so let's look at how much I've gotten in…

Read more »

Dividend Stocks

The Top Canadian REITs to Buy in April 2024

For growth and dividends this April, look to these two REITs that have quite the promising present as well as…

Read more »

Businessman holding tablet and showing a growing virtual hologram of statistics, graph and chart with arrow up on dark background. Stock market. Business growth, planning and strategy concept
Dividend Stocks

TFSA Magic: Earn Enormous Passive Income That the CRA Can’t Touch

If you're seeking out passive income, with zero taxes involved, then get on board with a TFSA and this portfolio…

Read more »

Man with no money. Businessman holding empty wallet
Dividend Stocks

2 Stocks Under $50 New Investors Can Confidently Buy

There are some great stocks under $50 that every investor needs to know about. Here’s a look at two great…

Read more »

think thought consider
Dividend Stocks

Down 10.88%: Is ATD Stock a Good Buy After Earnings?

Alimentation Couche-Tard (TSX:ATD) stock might not be the easy buy-case it once was. Here’s a look at what happened.

Read more »