2 Top Dividend Stocks for New TFSA Investors

These two top Canadian dividend stocks deserve to be on your TFSA radar today.

| More on:
Technology

Image source: Getty Images

Canadian investors of all ages are using the TFSA to generate tax-free income or build self-directed retirement portfolios inside their online brokerage accounts.

BCE

BCE (TSX:BCE)(NYSE:BCE) has been an anchor dividend stock in retirement and income portfolios for decades. The company generates strong free cash flow to support the generous dividends and continues to grow revenue and profits at a steady pace.

The emerging 5G network offers BCE a variety of new revenue opportunities in the coming years. Capital investments to get the network built are substantial, but investors should see the benefits through added protection of the competitive position of the business and well as the improvements to the bottom line.

BCE appears reasonable at the current share price near $65.25 per share and provides a 5.35% dividend yield. This should make the stock attractive for seekers of passive income as well as for investors who want a defensive anchor stock in their TFSA retirement fund that can deliver decent long-term total returns.

Bank of Nova Scotia

Bank of Nova Scotia (TSX:BNS)(NYSE:BNS) reported strong fiscal 2021 results that proved the bank has navigated the worst part of the pandemic in good shape. Profitability remains strong in the Canadian operations supported by deposits and loan growth. A robust housing market has helped drive profits, and the market is expected to remain strong, even as mortgage rates drift higher.

Bank of Nova Scotia’s international operations took a hit in 2020 but started to bounce back last year and are poised for solid long-term growth. The group is primarily focused on the Pacific Alliance trade bloc countries, including Mexico, Colombia, Peru, and Chile. Banking penetration is only about 50% in these markets that are home to more than 230 million people. As middle-class wealth expands in the coming years Bank of Nova Scotia should benefit from increased demand for loans and investment products.

Commercial banking opportunities are also attractive. Companies that are taking advantage of the trade pact need a variety of cash-management services, and Bank of Nova Scotia’s strong position in each of the four countries should give it a competitive edge.

Bank of Nova Scotia raised its dividend by 11% when it reported fiscal 2021 results. Another large payout hike could be on the way in 2022. The bank is also planning to buy back stock and could use some of the excess cash it built up to ride out the pandemic to make strategic acquisitions. The bank has previously indicated that wealth management opportunities in the United States could be on the radar.

Bank of Nova Scotia stock trades at a reasonable 11.7 times trailing 12-month earnings and provides a 4.4% dividend yield at the time of writing.

The bottom line on top dividend stocks for TFSA investors

BCE and Bank of Nova Scotia pay attractive dividends for TFSA income investors and should be solid anchor picks for those who are creating long-term retirement portfolios. If you have some cash to put to work in a TFSA, these stocks deserve to be on your radar.

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 BANK OF NOVA SCOTIA. Fool contributor Andrew Walker owns shares of BCE.

More on Dividend Stocks

edit Woman in skates works on laptop
Dividend Stocks

3 No-Brainer Stocks to Buy Under $30

These three stocks all offer a huge deal for investors looking for dividends, as well as growth that will last.

Read more »

You Should Know This
Dividend Stocks

How to Convert a $300 Monthly Investment Into $338 in Monthly Income

If you want a certain amount in monthly passive income, invest a similar amount today and leave the rest to…

Read more »

Increasing yield
Dividend Stocks

3 Income Stocks With Big Yields to Consider in April 2024

If you haven’t yet made your March investments, here are three income stocks to buy the dip and lock in…

Read more »

Senior Man Sitting On Sofa At Home With Pet Labrador Dog
Dividend Stocks

RRSP Investors: Don’t Miss Out on This Contribution Hack!

This hack has so many benefits for you -- not just when you put it in your RRSP but for…

Read more »

A red umbrella stands higher than a crowd of black umbrellas.
Dividend Stocks

Passive Income: 2 Safe Dividend Stocks to Own for the Next 10 Years

Dividend stocks such as Manulife and Fortis can help you generate a stable and recurring passive-income stream.

Read more »

Young woman sat at laptop by a window
Dividend Stocks

3 Dividend Stocks Everyone Should Own for the Long Haul

For investors looking for top-tier dividend stocks to buy and hold for the long term, here are three of my…

Read more »

Payday ringed on a calendar
Dividend Stocks

3 Dividend Stocks That Pay Me More Than $54.57 Per Month

These three dividend stocks have done me well over the years, so let's look at how much I've gotten in…

Read more »

Golden crown on a red velvet background
Dividend Stocks

Dividend Royalty: 3 Fabulous Stocks to Buy Now for Decades of Passive Income

Rogers Communications stock and Canadian Natural Resources stock could pay you dividends for decades to come.

Read more »