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TFSA: 3 Top Stocks to Own Forever

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Canadians have an extra $6,000 in TFSA room in 2021. With stock markets trading near all-time highs, investors want to know which stock are the best picks right now for a retirement fund.

Best TFSA stocks

The best stocks for buy-and-hold TFSA investors tend to be industry leaders with wide moats and long track records of dividend growth. Young investors can use dividends to buy new shares. This takes advantage of a powerful compounding process that can turn small initial investments into significant savings over the course of two or three decades.

Retirees use the dividends to supplement other pension income. Inside the TFSA, all earnings are tax-free. In addition, the CRA does not count the profits when determining net world income calculations for a potential OAS clawback.

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Why TC Energy stock deserves to be on your TFSA radar

TC Energy (TSX:TRP)(NYSE:TRP) has $100 billion in energy infrastructure assets, including natural gas transmission, gas storage, oil pipelines, and power generation.

Roughly 95% of comparable EBITA comes from long-term contracts or rate-regulated assets. This means cash flow is normally reliable and predictable. The quality of the assets showed up in the Q3 2020 results. Net income came in at $3.55 per share compared to $3.09 per share in Q3 2019.

TC Energy expects to raise its dividend by 8-10% in 2021 and 5-7% per year afterwards. Cash flow growth will come as the company works through its $37 billion secured capital program.

The stock appears cheap right now near $53 and offers a 6% dividend yield.

Should Bank of Montreal stock be on your TFSA buy list?

Bank of Montreal (TSX:BMO)(NYSE:BMO) paid its first dividend in 1829 and has given investors a piece of the profits every year since. That’s nearly two centuries of steady dividend payouts.

The stock isn’t as cheap as it was during the 2020 market crash, but Bank of Montreal still deserves to be part of a TFSA portfolio. The bank has large U.S. operations that give investors good exposure to American economic growth.

Bank of Montreal is sitting on large cash reserves that might be used to make another acquisition south of the border. When the pandemic ends, and the government allows the banks to boost payouts, investors could see also a nice increase to the distribution and stock buybacks.

The existing dividend provides a yield of 4.25%.

Is BCE stock a good TFSA buy now?

BCE is Canada’s largest communications company with wireless and wireline networks serving residential and business customers across the country. BCE also has a large media division that includes sports teams, a television network, specialty channels, and radio stations.

Every time a person in Canada calls a friend, sends a text, streams a movie, listens to the news, watches a hockey game, or checks e-mail, the odds are pretty good that a BCE asset is involved somewhere along the line. That’s a powerful business.

BCE is investing in its 5G expansion along with the fibre-to-the-premises project. These help protect the competitive moat and open up new revenue opportunities. Despite the large capital deployment, BCE still generates solid free cash flow. The dividend looks rock solid and provides a 6% yield at the current stock price.

The bottom line

TC Energy, Bank of Montreal, and BCE are all top companies that pay attractive dividends and have the potential to generate significant long-term returns for TFSA investors. If you have some cash available, these top stocks deserve to be on your radar.

Great news! The market is giving investors a chance to buy these top stocks at cheap prices today.

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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 Andrew Walker owns shares of TC Energy and BCE.

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