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 is another stock that is perfect for a TFSA . . .
Before you consider Air Canada, you may want to hear this.
Motley Fool Canadian Chief Investment Advisor, Iain Butler, and his Stock Advisor Canada team just revealed what they believe are the 10 best stocks for investors to buy right now... and Air Canada wasn't one of them.
The online investing service they've run since 2013, Motley Fool Stock Advisor Canada, has beaten the stock market by over 3X. And right now, they think there are 10 stocks that are better buys.
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.