1 Safe, Outperforming TSX Stock for TFSA Investors

Here is a low-risk TSX stock for your TFSA.

| More on:

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn more

Conservative investors often look for low- to moderate-risk stocks for the long term. Here is a stock with a proven track record along with a stable dividend profile. Investing in this stock through your Tax-Free Savings Account (TFSA) should maximize compounding benefits, with tax-free capital gains and dividends.

For 2022, the contribution limit in your TFSA stands at $6,000. If you have never invested in the TFSA since its inception in 2009, the accumulated limit is $81,500.

A top TSX stock for your TFSA

I recommend a relatively slow-moving stock with moderate return potential: Intact Financial (TSX:IFC). It is a $32.3 billion leading property and casualty insurer in Canada.

The company collects $20 billion in total annual premiums and boasts a leading 21% market share in Canada. Through the acquisition of RSA in 2020, the company expanded its global presence in Ireland and the United Kingdom.  

Intact stock has consistently outperformed the TSX Composite Index in the last five-year and 10-year horizon. It has returned 88% and 305% in these periods, including dividends, respectively.

Intact has exhibited superior financial growth in the last decade, although it’s in a relatively risky industry. Its revenues increased by 10% CAGR, while earnings expanded by a 16% CAGR in the last 10 years.

Stable earnings and dividends

The earnings stability enabled the insurer to pay steady dividends to its shareholders all these years. IFC currently yields 2.2%, which is lower than TSX stocks at large. However, notably, Intact has managed to grow its dividends by 11% compounded annually in the last 16 years.

Intact Financial looks well placed for the future because of its scale, diversified business mix, and leading market share. Pragmatic underwriting and its multi-channel distribution strategy will likely bode well for its earnings growth in the long term.

Intact has returned 30% in the last 12 months, beating TSX stocks at large. It is currently trading at $184, close to its all-time highs. The stock looks attractive, even if it is currently trading at record levels.

It is trading 14 times its earnings and looks fairly valued. It will likely continue to trade strong, driven by solid earnings growth and attractive valuation.


It would not be prudent to invest all your investable surplus into just one stock. Another stock with a low-risk and decent return potential that investors can consider is Enbridge (TSX:ENB)(NYSE:ENB). ENB stock yields 6.4% at the moment — one of the highest yields on the TSX.

Enbridge also earns stable cash flows with its huge energy pipeline network. In addition, most of its contracts are long-term and fixed-fee ones that offer good visibility about its future earnings.

Both of the above stocks could be intelligent picks for your TFSA. This is because the capital appreciation and dividend income generated within the TFSA will be tax-free for qualified investors, even at withdrawal.

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 Enbridge and INTACT FINANCIAL CORPORATION. Fool contributor Vineet Kulkarni has no position in any of the stocks mentioned.

More on Dividend Stocks

Happy couple being attended by office worker at office
Dividend Stocks

BCE Stock: A Great Pick to Boost Your RRSP Retirement Fund

BCE (TSX:BCE)(NYSE:BCE) stock is a dirt-cheap telecom stock with a huge dividend yield to keep RRSP investors happy.

Read more »

Money growing in soil , Business success concept.
Dividend Stocks

Want Easy Passive Income? These 2 Canadian Dividend Aristocrats Deliver

Passive income stars like Slate Grocery REIT (TSX:SGR.U) should be on your watch list.

Read more »

stock research, analyze data
Dividend Stocks

RRSP Investors: 1 Cheap TSX Dividend Stock to Buy Now and Own for 35 Years

RRSP investors can still find top TSX dividend stocks to buy at discounted prices.

Read more »

Cogs turning against each other
Dividend Stocks

2 of the Safest Stocks (With Dividends) to Buy in Canada Now

Here are two of the safest stocks investors in Canada can buy now.

Read more »

edit Businessman using calculator next to laptop
Dividend Stocks

2 Top Canadian Value Stocks Worth Buying Right Now

Here's why Alimentation Couche-Tard (TSX:ATD) and Toronto-Dominion Bank (TSX:TD)(NYSE:TD) are two top value stocks to consider right now.

Read more »

Happy shoppers look at a cellphone.
Dividend Stocks

2 Bargain Stocks You Can Buy Today and Hold Forever

Here's why Fortis (TSX:FTS)(NYSE:FTS) and Manulife (TSX:MFC)(NYSE:MFC) are two bargain stocks I think are worth considering right now.

Read more »

Retirement plan
Dividend Stocks

Passive Income: How Canadian Couples Can Earn $747 Tax-Free per Month for Life

Canadian couples can take advantage of their TFSA contribution space to create a significant stream of tax-free passive income.

Read more »

Golden crown on a red velvet background
Dividend Stocks

3 Canadian Dividend Aristocrats to Buy for Passive Income Forever

Passive-income stocks like BCE (TSX:BCE)(NYSE:BCE) should be on your radar.

Read more »