2 Top TSX Dividend Stocks to Start a TFSA Retirement Fund in 2022

These two stocks have made some long-term investors rich.

| More on:
edit Close-up Of A Piggybank With Eyeglasses And Calculator On Desk

Image source: Getty Images

Canadian savers are using their TFSAs to create retirement portfolios full of top TSX dividend stocks.

TFSA limit in 2022

The TFSA is a useful tool to help self-employed people and gig workers create their own pension.

Each year, the TFSA limit gets increased. For 2022, the TFSA contribution limit will be $6,000. This will bring the cumulative contribution space since the TFSA’s inception in 2009 to $81,500. That’s adequate room to create a meaningful pension plan to set you up for a comfortable life in retirement.

A popular strategy for a self-directed retirement fund is to buy top dividend stocks and use the distributions to acquire new shares. Most companies have a dividend-reinvestment plan (DRIP) that enables distributions to automatically buy new stock. Some even provide a discount of up to 5%.

Over time, the total return from the compounding process can be substantial, especially when dividends increase annually, and the share price gradually moves higher.

Let’s look at two top TSX dividend stocks to start a balanced TFSA fund.


Fortis (TSX:FTS)(NYSE:FTS) is a Canadian utility company based in Halifax with $57 billion in assets located across Canada, the United States, and the Caribbean.

The board has raised the payout in each of the past 48 years and intends to boost the distribution by an average rate of 6% per year through 2025. Fortis has a $20 billion capital program on the go that will increase the rate base by about a third over the next five years. The added revenue and cash flow will support the dividend hikes.

A $10,000 investment in Fortis 25 years ago would be worth about $175,000 today with the dividends reinvested.

TD Bank

TD (TSX:TD)(NYSE:TD) is a giant in the Canadian banking industry with a current market capitalization of $170 billion.

Government assistance for homeowners and businesses, along with deferrals on loan payments, helped avoid a wave of bankruptcies and loan defaults that many pundits feared would occur as a result of the pandemic lockdowns.

TD didn’t take as big a hit as expected, and the company is now sitting on significant extra cash it needs to deploy. The government just gave the banks the green light to start raising dividends again after placing a ban on payout hikes last year. TD has historically been one of the best dividend-growth stocks on the TSX Index. It wouldn’t be a surprise to see TD boost the payout by 20% when it announces fiscal Q4 2021 results.

Higher interest rates will put some borrowers in a tight spot starting in 2022, but the overall impact should be positive for TD. When interest rates rise, the bank can normally generate better net interest margins and get stronger returns on cash that has to be kept aside to cover deposits.

A $10,000 investment in TD Bank 25 years ago would be worth about $245,000 today with the dividends reinvested.

The bottom line on top stocks to start a TFSA pension

Fortis and TD are top dividend stocks that have delivered impressive total returns for investors over the past few decades. There is no guarantee they will generate the same results in the next quarter century, but these stocks still look attractive today for a diversified TFSA retirement fund.

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.

The Motley Fool recommends FORTIS INC. Fool contributor Andrew Walker owns shares of TD Bank and Fortis.

More on Investing

Dividend Stocks

Enbridge Is a High-Yielding Canadian Dividend Stock to Buy Now and Own Forever

Are you looking for a high-yielding Canadian dividend stock to buy? Enbridge (TSX:ENB) has plenty to offer investors.

Read more »

sale discount best price
Stocks for Beginners

3 TSX Growth Stocks You Can Buy at a Screaming Discount

These three growth stocks remain screaming buys, given their track records of growth and future opportunities for investors.

Read more »

Retirees sip their morning coffee outside.
Dividend Stocks

Why I’d Buy These 2 Healthcare Stocks Today (Besides the Cheap $10 Price)

Two small-cap stocks trading under $10 worth buying right now as promising healthcare plays in 2023.

Read more »

woman data analyze

Better Buy: Telus Stock or BCE?

Telus (TSX:T) and BCE (TSX:BCE) are dividend-growth stocks that seem like worthy pick-ups ahead of a recession year.

Read more »

Silver coins fall into a piggy bank.
Dividend Stocks

3 Dividend Stocks to Build Wealth in the New Year

These dividend stocks have proven they're set up for a strong future and have dividends you'll want to lock up…

Read more »

Dad and son having fun outdoor. Healthy living concept
Tech Stocks

Prediction: These Will Be 2 of the Strongest TSX Stocks in 2023

Tech stocks may have dropped during the last few years, but these two TSX stocks are bound for major growth…

Read more »

edit Person using calculator next to charts and graphs
Tech Stocks

This 1 Tech Stock Is My Hands-Down Choice Over Shopify

A small-cap tech stock with consistent revenue growth and nearly 300% profit growth is a better option over the TSX's…

Read more »

money cash dividends
Top TSX Stocks

Sitting on Cash? These 2 TSX Stocks Are Great Buys

Given their solid business models and stable cash flows, these TSX stocks could be steady investments in this volatile market.

Read more »