Recent market volatility has had stock prices bouncing around. For those looking to build their TFSA strategy, this means some stocks are now available for cheap.
When building a winning TFSA strategy, it’s vital to stay focused on the long term. So, scouting out deals on stocks today that can pay off in the future is key.
More specifically, it’s generally prudent to look for blue-chip stocks that offer not only solid growth prospects but also steady and reliable yields. Together, those two factors combine to offer total returns over the long term that trump most other forms of investing.
Today, we’ll take a look at two top blue-chip TSX stocks that can be key components of any TFSA strategy.
Bank of Montreal (TSX:BMO)(NYSE:BMO) is one of Canada’s major banks. It has strong footing in both the U.S. and Canada. It offers a wide variety of products and services to both individual and commercial customers.
It’s also one of the better capitalized banks in Canada with a rather strong balance sheet. As of writing, BMO is trading at $68.58 and yielding 6.18%.
In the short term, BMO is facing a bit of a pinch with lower interest rates, but this should be a non-issue for long-term investors. Plus, liquidity is available to the major banks via government support given the current circumstances.
For those building a TFSA strategy, BMO’s total return potential is great. TFSA investors can turn $10,000 into nearly $55,000 in 20 years with BMO, assuming dividends are re-invested and modest 3% growth rates on both the share price and yield.
Generally, owning Canadian banks is a winning long-term play. With BMO’s decent P/E valuation and outsized yield, now is a great time to pony up on that strategy.
While those economies are generally commodity focused and, as such, are hurting right now, the long-term growth potential is certainly there.
Scotiabank also faces the same short-term risks that BMO faces but also has the same liquidity support at its disposal.
As of writing, it’s trading at $53.74 and yielding 6.7%. Like BMO, Scotiabank is sitting at a decent P/E valuation relative to the trailing figure and is offering a massive yield relative to the trailing figure.
In a TFSA strategy, Scotiabank is another stock with potential for high returns. TFSA investors can turn $10,000 into nearly $60,000 in 20 years, assuming once again the dividends are re-invested and a 3% growth rate on the share price and yield.
If you’re willing to bet that Scotiabank’s reach outside Canada will be a major factor for growth in the long term, and that will help it outpace most of its peers, then Scotiabank is probably better value for you in a TFSA strategy.
TFSA strategy: Bottom line
For long-term investors, recent market volatility has created buying opportunities for many big-name stocks. BMO and Scotiabank are two prime examples of solid additions to any TFSA strategy that can be had for cheap.
With their outsized yields and solid track records for growth, these stocks both have amazing potential for high total returns over the long run within a TFSA.
These two major banks are worth a look for anyone adding to their TFSA strategy at the moment.
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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 Jared Seguin has no position in any of the stocks mentioned. The Motley Fool recommends BANK OF NOVA SCOTIA.