TFSA Investors: 3 Best Dividend Stocks to Buy Today

Dividend stocks like Bank of Nova Scotia (TSX:BNS)(NYSE:BNS) are perfect to hold in your TFSA for the long term.

| More on:
Various Canadian dollars in gray pants pocket

Image source: Getty Images

Last year, the federal government announced that the annual contribution for a Tax-Free Savings Account (TFSA) would stay at $6,000 in 2021. This boosted the cumulative contribution room to $75,500. That is a great starting point for investors looking to churn growth or income.

Today, I want to explore how we can achieve the latter. We’ll look at three top dividend stocks to stash in your TFSA for the long term. These can provide steady tax-free income going forward.

Why TFSA investors should zero-in on the energy sector

Altagas (TSX:ALA) is a Calgary-based diversified energy infrastructure company. In late February, I’d suggested that Canadian investors should look to energy stocks as oil and gas prices continue to surge. Shares of Altagas have climbed 11% in 2021 as of early afternoon trading on March 12. The dividend stock is up 65% from the prior year.

In 2020, the company delivered normalized EBITDA of $1.31 billion. This came out on the higher end of its full-year guidance at the beginning of the year. In December, Atlagas expects normalized EBITDA between $1.4 billion and $1.5 billion. Meanwhile, it is targeting a 4% dividend hike.

Shares of Altagas possess a favourable price-to-earnings ratio of 17. TFSA investors can rely on its monthly dividend of $0.083 per share. That represents a solid 4.8% yield.

This top bank stock still offers solid value

Canadian bank stocks are always a solid middle-ground for TFSA investors. These profit machines offer a balanced approach, delivering capital growth and decent income. Scotiabank (TSX:BNS)(NYSE:BNS) is one of my favourite dividend stocks of the Big Six to target right now. Shares of Scotiabank have climbed 16% so far this year.

The bank released its first quarter 2021 results on February 23. Like its peers, Scotia beat expectations to open the year. Moreover, all banks have benefited from a drop in provisions for loan losses. Scotia’s profit rose 3% from the prior year to $2.4 billion. The bank’s earnings were powered by its strong wealth management and global banking and markets divisions.

Scotiabank stock last had a P/E ratio of 14, putting it in solid value territory. This dividend stock offers a quarterly distribution of $0.90 per share. That represents a 4.5% yield that you can count on in your TFSA.

Another super dividend stock to add to your TFSA

Cogeco Communications (TSX:CCA) is a top Canadian communications company. I’d recommended that Canadians scoop up this undervalued dividend stock in early February. Shares of Cogeco have climbed 20% in 2021 so far.

The company came out of the gate strong in Q1 2021. Revenue rose 4.5% from the prior year to $646 million. Meanwhile, adjusted EBITDA climbed 10% to $321 million. Cash flows from operating activities jumped nearly 56% to $235 million.

This dividend stock has a favourable P/E ratio of 14. It last paid out a quarterly dividend of $0.64 per share, which represents a 2.2% yield. TFSA investors should snatch up this reliable dividend stock today.

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. The Motley Fool recommends ALTAGAS LTD. and BANK OF NOVA SCOTIA.

More on Investing

Nuclear power station cooling tower
Metals and Mining Stocks

If You’d Invested $1,000 in Cameco Stock 5 Years Ago, This Is How Much You’d Have Now

Cameco (TSX:CCO) stock still looks undervalued, despite a 258% rally. Can the uranium miner deliver more capital gains to shareholders?

Read more »

Businessman holding tablet and showing a growing virtual hologram of statistics, graph and chart with arrow up on dark background. Stock market. Business growth, planning and strategy concept
Dividend Stocks

TFSA Magic: Earn Enormous Passive Income That the CRA Can’t Touch

If you're seeking out passive income, with zero taxes involved, then get on board with a TFSA and this portfolio…

Read more »

Man with no money. Businessman holding empty wallet
Dividend Stocks

2 Stocks Under $50 New Investors Can Confidently Buy

There are some great stocks under $50 that every investor needs to know about. Here’s a look at two great…

Read more »

potted green plant grows up in arrow shape
Stocks for Beginners

3 Growth Stocks I’m Buying in April

These three growth stocks are up in the last year, and that is likely to continue on as we keep…

Read more »

clock time
Tech Stocks

Long-Term Investing: 3 Top Canadian Stocks You Can Buy for Under $20 a Share

These three under-$20 stocks offer excellent buying opportunities for long-term investors.

Read more »

Arrowings ascending on a chalkboard
Energy Stocks

Beat the TSX With This Cash-Gushing Dividend Stock

Canadian Natural Resources stock is well set up to beat the TSX as it continues to generate strong cash flows…

Read more »

think thought consider
Dividend Stocks

Down 10.88%: Is ATD Stock a Good Buy After Earnings?

Alimentation Couche-Tard (TSX:ATD) stock might not be the easy buy-case it once was. Here’s a look at what happened.

Read more »

money cash dividends
Dividend Stocks

TFSA Dividend Stocks: Earn $1,200/Year Tax-Free

Canadian stocks like Fortis are a must-have in your portfolio to earn tax-free yields for decades.

Read more »