2021 Buy Alert: 2 Top Dividend Stocks for TFSA Investors

Here’s why TFSA investors might want to use their $6,000 limit in 2021 to buy top dividend stocks.

| More on:
edit Business accounting concept, Business man using calculator with computer laptop, budget and loan paper in office.

Image source: Getty Images

The 2021 TFSA limit is $6,000. Investors with some cash on the sidelines are wondering which top Canadian stocks should be on their TFSA buy lists.

Will dividend stocks rebound in 2021?

Dividend stocks trailed tech plays in the 2020 market rally. In fact, many of Canada’s leading dividend payers continue to trade at cheap prices, despite the fact that the broader TSX Index finished 2020 with a gain. As 2021 unfolds the market could see a shift of funds from growth to yield.

Interest rates remain at record-low levels. As a result, investors seeking income on their savings will look for better returns than they get on GICs that only pay about 1% today. Stocks come with risks, but many of Canada’s leading dividend stocks pay distributions that continue to increase every year.

Low rates are expected to remain in place for some time. This should support demand for high-quality dividend stocks in 2021 and beyond.

Why Fortis stock is a good buy for TFSA investors

Fortis (TSX:FTS)(NYSE:FTS) owns power generation, electricity transmission, and natural gas distribution businesses in Canada, the United States, and the Caribbean.

The majority of the revenue comes from regulated assets. This means cash flow tends to be reliable and predictable. Homeowners and companies need to keep the lights on and heat their buildings regardless of the broader economic situation. Adjusted net income for Q3 2020 was $302 million, or $0.65 per share, compared to $287 million, or $0.66 per share, in the same quarter last year.

Fortis grows through acquisitions and internal projects. The current five-year capital plan of $19.6 billion is expected to boost the rate base from $30.2 billion in 2020 to $40.3 billion by 2025. Fortis raised the dividend by 5.8% in 2020 and intends to increase the payout by an average of 6% per year through 2025. The board hiked the dividend in each of the past 47 years.

The stock appears cheap right now near $51 per share and provides a 4% yield. Fortis traded as high as $59 in the past 12 months.

Should Canadian Natural Resources stock be on your TFSA buy list?

TFSA investors who’d bought Canadian Natural Resources (TSX:CNQ)(NYSE:CNQ) shares near $10 in March have already tripled their money. Despite the strong rally, the stock still appears cheap.


WTI oil just topped US$50 per barrel. Natural gas is up 80% since July. CNRL is a major producer of both oil and natural gas. The company says its WTI operating breakeven price is less than US$31 per barrel, so the company should generate strong profits at current oil prices.

Management recently raised the capital program for 2021 based on the strong commodity prices. Oil is expected to average US$50 per barrel in 2021, and some analysts see a rally as high as US$60 at some point during the year. New pandemic lockdowns around the globe could put a dent in the demand recovery for the first part of 2021, but OPEC+ has agreed to maintain supply cuts to prop up the market.

CNRL’s dividend looks safe and provides a 5.25% yield at the current share price of $32.25. The stock traded above $40 in January last year, so there is decent upside opportunity as the global economy improves. Volatility should be expected, but you get paid well to ride out the turbulence.

The bottom line

TFSA investors can get decent yield from reliable dividend stocks right now. Fortis and CNRL appear reasonably price and offer a shot at solid upside through the end of the year. If you have some cash available for your TFSA limit in 2021 these stocks deserve to be on your radar.

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.

The Motley Fool recommends FORTIS INC. Fool contributor Andrew Walker owns shares of Fortis.

More on Energy Stocks

A solar cell panel generates power in a country mountain landscape.
Energy Stocks

1 TSX Sector I’m Bullish on in October 2022

Renewable energy is exactly where investors should sit on their cash, so this is the top stock I'd recommend to…

Read more »

canadian energy oil
Energy Stocks

Why Baytex Energy (TSX:BTE) Stock Tumbled 17% in September

Should you buy BTE stock?

Read more »

Group of industrial workers in a refinery - oil processing equipment and machinery
Energy Stocks

1 Energy Stock I Bought This Year — and 1 I Sold

I bought and sold Suncor Energy (TSX:SU)(NYSE:SU) stock this year. There is one other energy stock I bought and held.

Read more »

Solar panels and windmills
Energy Stocks

This Stock Has Delivered a Gain of 85.3% Over 3 Years – Should You Buy It?

A dividend aristocrat that delivered massive gains in the last 3 years is a strong buy for its exceptional financial…

Read more »

A close up image of Canadian $20 Dollar bills
Energy Stocks

3 Top TSX Stocks to Buy for Monthly Passive Income

Here are three of the best TSX dividend stocks Canadian investors can buy right now to earn reliable monthly passive…

Read more »

green power renewable energy
Energy Stocks

Why Fortis (TSX:FTS) Stock Tumbled to 18-Month Lows Last Week

Even the stable utility sector has felt the market correction. Here's why Fortis stock is still a top defensive bet.

Read more »

A stock price graph showing declines
Dividend Stocks

Here’s Why I’m Confident About Investing Through the Down Market

There is no bear market in history that has not been followed by a bull cycle. Rather than fret over…

Read more »

Glass piggy bank
Dividend Stocks

How to Make $165 per Month in Passive Income Right Now

These two monthly passive income stocks are offering ultra-high dividends for investors right now.

Read more »