Q4 Investing Alert: A Top TFSA Income Stock to Buy Ahead of the U.S. Election

The end of 2020 might see new volatility in the stock market due to the U.S. election. Where should TFSA income investors put their money today?

| More on:

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Investors with a bit of cash to invest in their TFSA income portfolios want to know where they can get good value and minimize risk heading into 2021.

U.S. election risk for stocks

The U.S. election is just around the corner, and markets appear to be oddly at ease right now given the potential for turbulence. A decisive victory by either candidate would likely result in positive momentum for the markets through the end of the year. However, the prospect of a close race carries risk.

Mail-in balloting is causing some friction. The number of votes that will be sent in by mail will hit a record level in this U.S. election. People are afraid of COVID-19 and prefer to avoid heading to the polls in person to cast their votes. President Trump claims the mail-in process favours the Democrats. He suggests fraud is involved. He has indicated he might contest the results if he loses. This could lead to court challenges across the country and delay the official outcome of the election.

In a press conference in late September, President Trump refused to say if he would allow for a smooth transition of power in the event he doesn’t get re-elected. This is unlikely, as the president would have to follow the rules that are in place. The larger concern, however, according to some analysts, is the potential for civil unrest in the event the president loses.

Stock markets don’t react well to uncertainty. Any indication there could be a messy power struggle after the election, or widespread protests, could send share prices plunging. When the Bush/Gore election resulted in recounts, the stock market fell for weeks before finally stabilizing.

Given the uncertainty, it makes sense to take a more conservative approach right now with dividend picks for a TFSA income portfolio.

Best TFSA income stocks to buy to ride out volatile markets

Companies that have strong businesses and provide essential services should be high on the list.

Reliable and growing dividends are important. In the event the market tanks, you get paid well to ride out the volatility. Lower share prices also provide an opportunity to use the distributions to buy more stock at a discount.

Let’s take a look at BCE (TSX:BCE)(NYSE:BCE) to see why it might be an interesting pick.

BCE is Canada’s largest communications company. All of its business is in Canada, including its country-wide wireless and wireline networks. The stock might move along with a broad-based market dip or increase due to the U.S. election result, but the overall operations are not going to see a direct impact.

BCE’s share price looks cheap right now near $55. Investors who buy at this level can pick up a solid 6% dividend yield. The shares traded as high as $65 in the past 12 months, so there is decent upside opportunity when the economy improves and the media group gets back on its feet in 2021.

The bottom line

The next two months could bring new turbulence in the equity markets. If you want to put some cash to work in your TFSA income fund, BCE deserves to be on your radar today.

Should you invest $1,000 in BCE right now?

Before you buy stock in BCE, consider this:

The Motley Fool Stock Advisor Canada analyst team just identified what they believe are the Top Stocks for 2025 and Beyond for investors to buy now… and BCE wasn’t one of them. The Top Stocks that made the cut could potentially produce monster returns in the coming years.

Consider MercadoLibre, which we first recommended on January 8, 2014 ... if you invested $1,000 in the “eBay of Latin America” at the time of our recommendation, you’d have $20,697.16!*

Stock Advisor Canada provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month – one from Canada and one from the U.S. The Stock Advisor Canada service has outperformed the return of S&P/TSX Composite Index by 29 percentage points since 2013*.

See the Top Stocks * Returns as of 3/20/25

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 Andrew Walker owns shares of BCE.

Confidently Navigate Market Volatility: Claim Your Free Report!

Feeling uneasy about the ups and downs of the stock market lately? You’re not alone. At The Motley Fool Canada, we get it — and we’re here to help. We’ve crafted an essential guide designed to help you through these uncertain times: "5-Step Checklist: How to Prepare Your Portfolio for Volatility."

Don't miss out on this opportunity for peace of mind. Just click below to learn how to receive your complimentary report today!

Get Our Free Report Today

More on Dividend Stocks

A worker gives a business presentation.
Dividend Stocks

Market Dip: Opportunity or Risk This April?

This market dip might have investors worried, but should they be excited instead?

Read more »

Blocks conceptualizing Canada's Tax Free Savings Account
Dividend Stocks

Why I’d Add This Top TSX Dividend Stock to My TFSA During the Current Dip

The market is full of volatility right now. Fortunately, this top TSX dividend trades at a discount and pays a…

Read more »

Pile of Canadian dollar bills in various denominations
Dividend Stocks

Invest $20,000 in 2 TSX Stocks for $1,421.09 in Passive Income

Are you looking to bump up your passive income? Then consider these two TSX stocks.

Read more »

A plant grows from coins.
Dividend Stocks

Where I’d Invest in Canadian Value Stocks for Long-Term Compounding

When markets plunge, Warren Buffett's wisdom shines: Get greedy when others are fearful. Canadian value stocks like Scotiabank await patient…

Read more »

analyze data
Dividend Stocks

How I’d Invest $28,000 in Canadian Natural Resource Stock to Amass Personal Wealth

Investing in TSX dividend stocks such as Enbridge can help you earn a passive-income stream in 2025.

Read more »

hand stacks coins
Dividend Stocks

Got $400? How I’d Start Building Income With 3 High-Yield Stocks for the Long Term

These high-yield dividend stocks have a solid payout history, making them compelling investments to generate passive income.

Read more »

A close up color image of a small green plant sprouting out of a pile of Canadian dollar coins "loonies."
Dividend Stocks

I’d Put $15,000 in These 3 Dividend-Growth Champions for Increasing Income Potential

Want to offset some volatility? Here are three defensive dividend-growth champions that can generate a juicy yield right now.

Read more »

Blocks conceptualizing Canada's Tax Free Savings Account
Dividend Stocks

Transform Your TFSA Into a Cash-Creating Machine With $7,000

Discover how the Tax-Free Savings Account can be your golden goose for generating cash without losing your investment.

Read more »