TFSA Investors: 2 Dividend Stocks That Can Make You Rich!

These top TSX stocks can generate recurring income for your portfolio for decades.

| More on:
Businessperson's Hand Putting Coin In Piggybank

Image source: Getty Images

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

If you want to see your portfolio grow in value without taking on much risk, investing in dividend stocks can help you achieve just that. Companies that pay dividends are generally established businesses with strong profits that can afford to distribute out their earnings back to shareholders. But investors shouldn’t settle for any type of dividend stock — they should focus on buying shares of companies that regularly increase their payouts. That’s because a 5% yield today could end up paying you 10% of your original investment several years down the road. And if you hold that type of investment in your Tax-Free Savings Account, you can accumulate all that income on a tax-free basis.

Here are two dividend-growth stocks that have excellent track records for paying and increasing their payments that can make you rich years from now.

Enbridge

In December 2020, pipeline company Enbridge (TSX:ENB)(NYSE:ENB) raised its dividend payments for the 26th consecutive year. The Dividend Aristocrat increased the payouts by a modest 3%. Today, investors who buy shares of the company are earning a yield of around 7.6%. If the company continues to increase its dividend payments at a rate of 3%, it would take 24 years for its payout to double. However, this is also under very challenging times and where the industry is facing a great deal of uncertainty due to the coronavirus pandemic.

As the economy recovers and once things (hopefully) get back to normal, Enbridge could raise its payments at a higher rate. Many companies have slashed or suspended their dividend payments in the past year, and so even a nominal increase in payouts looks great right now. And in the past six months, the stock itself has been fairly stable, climbing 3% in value.

Enbridge has continued to demonstrate stability and profitability over the past four quarters, reporting a positive operating income that over the trailing 12 months has been more than 20% of its total revenue. And during that time, Enbridge has also generated free cash flow of more than $4.1 billion.

Bank of Nova Scotia

Another great dividend stock to hold is Bank of Nova Scotia (TSX:BNS)(NYSE:BNS). The top bank stock pays a quarterly dividend yield of 5%. It’s not as high of a payout as Enbridge’s, but it makes up for that by being a lot more stable. Over the past 12 months, its share price has been flat, while the TSX has risen by about 2.6%. Enbridge, by comparison, has fallen 19% during the same period.

Its current dividend payment of $0.90 is 25% higher than the $0.72 the company was paying five years ago, growing at a compounded annual growth rate of about 4.6% during that time. If Scotiabank were to continue raising its dividend payments at that rate, it would take approximately 16 years for its payouts to double.

The company reported its latest earnings on Tuesday, and they indicated that the business was doing well, achieving year-over-year growth of 1% in diluted earnings per share. Bank stocks struggled in the early stages of the coronavirus pandemic, as the economy was struggling amid lockdowns. But stimulus payments like the Canada Emergency Response Benefit have helped and with vaccinations underway, there’s hope that there could be better times ahead, which could make Scotiabank an even better buy right now.

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 David Jagielski has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Enbridge. The Motley Fool recommends BANK OF NOVA SCOTIA.

More on Investing

Hands holding trophy cup on sky background
Investing

3 Growth Stocks That Could Be Huge Winners in the Next Decade and Beyond

Here are three top TSX growth stocks that may be worth a look, given the significant valuation declines these stocks…

Read more »

edit Back view of hugging couple standing with real estate agent in front of house for sale
Dividend Stocks

Why Real Estate Stocks Are a No-Brainer Addition to Your Portfolio

Real estate stocks, especially REITs, offer some distinct advantages over other types of stocks, making them must-have additions to most…

Read more »

Man data analyze
Stocks for Beginners

Beginners: 2 Market-Beating Stocks Just Getting Started

Brookfield Asset Management (TSX:BAM.A)(NYSE:BAM) and Constellation Software (TSX:CSU) are proven market beaters that could continue their ways.

Read more »

oil and natural gas
Energy Stocks

Small OPEC+ Oil-Output Hike: Buy More Energy Stocks?

Energy stocks could soar higher, because oil markets will remain tight due to the small production increase by OPEC+.

Read more »

Various Canadian dollars in gray pants pocket
Dividend Stocks

3 Top TSX Dividend Stocks to Buy for Monthly Passive Income

Top TSX stocks with monthly dividends now trade at cheap prices for investors seeking passive income.

Read more »

edit Person using calculator next to charts and graphs
Investing

Where to Invest $500 in the TSX Right Now

Long-term investors can look to buy stocks, including Suncor Energy and Shopify, as they are poised to outpace the broader…

Read more »

Canadian Dollars
Dividend Stocks

Create Free Passive Income and Turn it Into Thousands With 1 TSX Stock

If you can't afford to invest, you can certainly create passive income another way and use that to invest in…

Read more »

falling red arrow and lifting
Investing

2 Oversold TSX Stocks That Should Bounce Back

Stocks that are oversold without an external catalyst like a market crash or a weak sector might be risky buys,…

Read more »