The Tax-Free Savings Account (TFSA) was launched all the way back in 2009. This investment vehicle is by far my favourite offered as a registered account. Active investors, whether you are pursuing growth or income, can get huge benefits from using this versatile and dynamic vehicle. All capital gains and income generated in a TFSA are completely tax free. Today, I want to look at two dividend stocks that are worth holding for decades in your portfolio.
Why bank stocks are still perfect for a TFSA
In the middle of May, I’d discussed my top three bank stocks for the rest of 2020. The COVID-19 pandemic laid waste to bank stock valuations, and investors got a look at the damage, as banks released second-quarter earnings in May. Earnings took a sharp dip, but bank stocks still received a boost, as investors prepare for an economic reopening.
Bank stocks offer steady capital growth and solid income. This can lead to fantastic tax-free accumulation in a portfolio geared for the long term.
National Bank (TSX:NA) is the smallest of the Big Six banks, but it is a heavy hitter in the province of Quebec. Shares of National Bank have dropped 9.5% in 2020 as of close on June 4. However, the stock has increased 16% month over month.
In the second quarter, National Bank reported net income of $379 million, or $1.01 per share, compared to $558 million, or $1.51 per share, in the prior year. Like its peers, National Bank saw its provisions for credit losses surge in Q2. It reported provisions for credit losses totalling $504 million. However, income before provisions for credit losses and income taxes on a taxable equivalent basis reached $991 million — up 20% from Q2 2019.
The board of directors declared a quarterly dividend of $0.71 per share, representing a solid 4.4% yield. Better yet, National Bank possesses a favourable price-to-earnings ratio of 10 and a price-to-book value of 1.6. Like its peers, it boasts a fantastic balance sheet and has a great record as a dividend payer. National Bank is a great long-term hold in a TFSA.
One stock that will grow on the back of demographic shifts
In early May, I’d targeted Jamieson Wellness (TSX:JWEL) as a must-own super stock. Shares of Jamieson have climbed 23% in 2020 as of close on June 4. The stock is up 67% year over year. This is a stock to stash in your TFSA for years to come.
Jamieson is a developer, manufacturer, distributor, and marketer of supplements and natural health products. A recent report from Grand View Research forecasts that the global dietary supplements market will be worth $230 billion by 2027. This would represent a CAGR of 8.2% from the start of the forecast period. Aging demographics are expected to contribute to the success of this industry, as older consumers are more likely to stock up on natural health products and supplements.
In its first-quarter 2020 results, Jamieson reported adjusted net income of $7.8 million — up 20% from Q1 2019. The COVID-19 pandemic put a spotlight on public health, which led to increased demand for Jamieson’s products in March. Moreover, its international business achieved 51.3% growth in the quarter. This was due to strong growth in Europe and China.
Jamieson last announced a quarterly dividend of $0.11 per share, representing a modest 1.4% yield. The stock is currently trading a few dollars off its 52-week high. Value investors may want to wait for a more attractive entry point. In any case, Jamieson is well positioned to deliver nice results for its shareholders going forward.
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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 Ambrose O'Callaghan has no position in any of the stocks mentioned.