TFSA Investors: 2 Top Dividend Stocks to Hold Forever

Algonquin Power & Utilities and Fortis stock are excellent stock picks for income-seeking TFSA users.

| More on:

The Tax-Free Savings Account (TFSA) has become one of the best investment vehicles for Canadian investors for various medium and long-term financial goals. A portfolio of reliable dividend-paying stocks in your TFSA effectively is a gift that keeps on giving.

Several Canadian companies have been paying dividends for a long time. A few of these companies have also managed to grow their dividends each year without interruption for lengthy dividend growth streaks. Today I will discuss two such stocks that Canadian investors seeking to create a passive income stream through their TFSAs could consider adding to their portfolios.

Fortis

Fortis (TSX: FTS)(NYSE: FTS) could be an ideal addition to a TFSA portfolio to generate long-term returns through dividend income. The company is a Canadian Dividend Aristocrat with a 47-year dividend growth streak. The utilities holding company can generate substantial cash flows to finance its growing dividends due to the essential nature of its services.

Fortis earns most of its income through rate-regulated and contracted assets. The company can generate predictable cash flows that the management can use to finance growing dividend payouts and expansion plans. Fortis projects its annual dividends to increase by a compound annual growth rate (CAGR) of 6% over the next five years.

Fortis is a low-risk investment that continues to boost its shareholders’ returns. With its renewable energy investments providing potential for excellent long-term growth, Fortis could be an ideal investment to consider holding forever.

Algonquin Power & Utilities

Algonquin Power & Utilities (TSX: AQN)(NYSE: AQN) is another excellent stock that you can consider adding to a dividend income portfolio in your TFSA. The stock has solid potential to provide you with stellar long-term returns through its dividend payouts. The company has increased its payouts by 10% in the last 11 years.

The utility sector operator has consistently increased its earnings in double-digits over several years. Its contracted and rate-regulated assets generate predictable, safe, and reliable cash flows that the company can use to support its growing dividends. Algonquin’s management focuses on increasing its bottom line at a rapid pace.

Algonquin has also been expanding its renewable energy and electric transmission projects. Combined with strategic acquisitions over the years, Algonquin Power & Utilities could provide consistently increasing cash flows.

Foolish takeaway

A strong TFSA dividend income portfolio can provide you with consistent, reliable, and growing passive income. You can consider letting the cash grow in your account or reinvesting the dividends to unlock the power of compounding to accelerate your wealth growth and become a much wealthier investor by the time you retire.

Algonquin and Fortis stock trade for $18.52 and $54.82 per share at writing. The two companies boast dividend yields of 4.48% and 3.68%, respectively.

Algonquin Power & Utilities and Fortis could be excellent investments to begin building a TFSA portfolio that you can use as an additional income stream to grow your wealth in the long run.

Fool contributor Adam Othman has no position in any of the stocks mentioned. The Motley Fool recommends FORTIS INC.

More on Dividend Stocks

up arrow on wooden blocks
Dividend Stocks

2 Great Canadian Dividend Stocks That Just Raised Their Payouts Again

These companies have delivered annual dividend growth for decades.

Read more »

a man relaxes with his feet on a pile of books
Dividend Stocks

TFSA Passive Income: 3 Incredible Stocks That Earn $2,148/Year

These Canadian stocks have a solid history of dividend distribution and are likely to sustain their payouts in the years…

Read more »

The sun sets behind a power source
Dividend Stocks

Why This Canadian Utility Stock Could Be the Best Stock You Never Think About

This mini-Fortis (FTS) stock is a high-yield Canadian utility stock hidden in plain sight

Read more »

Offshore wind turbine farm at sunset
Dividend Stocks

While Interest Rates Sit Still, These 2 Dividend Giants Look Good

Looking for more income? Check out these two high-income stocks!

Read more »

Colored pins on calendar showing a month
Dividend Stocks

How to Build a Monthly Paycheque Portfolio With Only 5 Stocks

Explore how to build a monthly income with stable dividend stocks in Canada. Grow your paycheque with smart investments.

Read more »

Start line on the highway
Dividend Stocks

Canada Has $500 Billion of Major Projects in the Pipeline: Here’s the Stock I’d Buy

Canada’s plan to speed up approvals for mega-projects could make WSP a key winner long before construction even starts.

Read more »

Concept of multiple streams of income
Dividend Stocks

This 4.1% Dividend Stock Is Such an Easy Passive Income Play

A 4.1% yield might not turn heads, but TC Energy's growing natural gas network makes this dividend stock an easy…

Read more »

Canadian Red maple leaves seamless wallpaper pattern
Dividend Stocks

The Companies Quietly Rewarding Canadian Shareholders While No One’s Watching

Some of Canada's steadiest dividend growers never make the headlines. Here are two TSX stocks quietly putting more cash in…

Read more »