For new investors starting out with dividend stocks, a 5% is a satisfying yield to begin with. While there are certainly other reasons to buy and hold stocks – such as defensiveness, quality indicators, and the chance of capital gains – sticking to a 5% yield can make for a richly rewarding Tax-Free Savings Account (TFSA) or other long-term portfolio built around excellent Canadian businesses, such as the following.
Wide-moat plays for TSX strength
Canadian Imperial Bank of Commerce (known as CIBC) is the lowest on the ladder when it comes to the Big Five group of domestic bankers renowned for their steady passive income generation. However, CIBC is the richest yielding of the five. With a 5.36% that’s both appetizing and reliable, CIBC is a solid addition to a TFSA.
CIBC is also diversified and attractively valued, trading at a discount of around 35% of its fair value. And while growth is not one of the most common attributes of a bank stock, CIBC is nevertheless looking at an increase in income of around 2.25% per year.
BCE is another of Canada’s great blue-chip institutions, and its wide moat and dividend of 5.21% make it a strong addition to any tax-free wealth creation strategy.
The telecommunications and media giant is one of the country’s top choices for wireless, wireline, and Internet services. Its exposure to television and content streaming also make for a rare Canadian horse in the streaming race.
On sale at a discount of 54% of its fair value, growth is also on display here, with an expected 2.58% hike in income per year. This continues a trend that saw roughly 5% income growth in the past 12 months.
While this growth is not significant in the grand scheme of the TSX Index, it’s notable in the saturated and highly competitive Canadian telecom space.
Get defensive with power and apartments
Pundits like Jim Cramer are all for ditching fossil fuels, and with stocks like TransAlta Renewables available to Canadians, there’s no reason not to divest oneself of underperforming oil and gas stocks.
TransAlta Renewables is a full-service play that develops, owns, and manages green power operations. On offer to TFSA investors is a rich a 5.96% yield, 38.2% discount, and recent earnings growth of 27.3%.
Northview Apartments REIT comes in high on the list of residential real estate investment trusts. With a 5.4% dividend and access to multi-family units diversified across Canada, Northview Apartments boasts an impressive portfolio that also includes commercial sites.
It’s a cheap stock selling with more than a third off its fair value in terms of future cash flows and saw an impressive 90% growth in income in the last 12 months.
Sticking with the REIT theme but just as defensive, TFSA stock pickers could consider stashing shares in NorthWest Healthcare Properties REIT. An even richer yield of 6.53% dividend yield is on offer, backed up with high income growth of almost 170% in the last year.
This is set to continue with a projected 43% growth in income annually. Discounted by more than half its fair value, it’s a strong buy.
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 Victoria Hetherington has no position in any of the stocks mentioned. The Motley Fool recommends NORTHWEST HEALTHCARE PPTYS REIT UNITS.