TFSA Investors: 3 Dividend Stocks to Buy With $6,000

When you are investing a small amount of capital in a dividend stock, DRIP might be a slightly better option than taking out cash dividends.

| More on:
IMAGE OF A NOTEBOOK WITH TFSA WRITTEN ON IT

Image source: Getty Images

Everyone has a different schedule for contributing to their TFSA. Some put a specific amount a month, and the current $6,000 breaks down to a neat sum of $500 a month. Others might contribute larger sums every two or three months or even once a year when they get their year-end bonuses.

Regardless of what your contribution “schedule” is, there are three dividend stocks that you may consider buying with this year’s $6,000. It’s important to note that $2,000 apiece may not get you a lot of cash, so the passive-income angle might not be viable with this much capital. So you may want to think about a dividend reinvestment program (DRIP). If you hold on to these dividend stocks for long enough, the DRIP may help you grow your stake to a decent size over time.

A REIT

When you buy a REIT for the long term, and you want to gauge its financial sustainability, it’s a good idea to look beyond the metrics and consider the asset class you are investing in as well. Take PRO REIT (TSX:PRV.UN) as an example. It’s a commercial property REIT with an asset mix leaning quite heavily towards industrial properties that make up about 54% of the 120-properties portfolio. The rest is the office and retail properties.

Industrial properties, even the heavy industry ones (manufacturing), tend to be quite stable. And if the tenant portfolio is healthy and long-term leases are signed, the REIT can be held long term. PRO REIT ticks most of the boxes, especially the yield one, as it’s currently offering a mouth-watering yield of 6.6%.

At $2,000, that would result in $132 a year, which may not seem like much, but it can get you at least 18 more shares of the REIT at $7 a share (a little more than its current price).

A telecom giant

If you are looking for a well-established Dividend Aristocrat to buy with your TFSA funds, BCE (TSX:BCE)(NYSE:BCE) is a good option. The telecom giant is currently offering a juicy 5.5% yield, relatively high compared to its peers in the industry. The yield would have been much higher if you had bought it during the pandemic slump, but it’s still quite significant, especially considering that the stock is trading at an all-time high.

The payout ratio is over 100%, but it’s lower than what it was in 2020, and the company has raised the payout by a sizeable margin. With $2,000, you can buy almost 30 shares of the company and about one and a half (fractional share) with the yearly payouts. And if the company keeps up with its steady 10-year CAGR of 10.7%, you can expect a decently paced capital appreciation as well.

A life insurance company

For capital appreciation, Sun Life Financial (TSX:SLF)(NYSE:SLF) is a good dividend option to consider. Because even though its 3.9% yield is not as strong compared to the other two, the 10-year CAGR of 17%, at the current incredibly fair (almost undervalued) price, makes it an ideal bargain.

Sun Life, while well known for its life insurance, has a relatively diverse business model and a decent international reach. It’s one of the largest life insurance companies in Canada, which is not just a competitive edge but a testament to its stability as well.

If you invest $2,000 in the company, you may be able to buy back just one share with a year’s worth of dividends. But the capital-appreciation potential of the stock makes up for whatever it lacks when it comes to dividends.

Foolish takeaway

These three dividend-growth stocks could be brilliant additions to your TFSA. They can help expedite the growth of your TFSA nest egg, and the dividends, even if they are not healthy enough for their respective DRIPs, can be used for other investments — i.e., companies with relatively smaller share prices.

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 Adam Othman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

More on Dividend Stocks

Dividend Stocks

3 Expensive TSX Stocks I’d Buy if They Took a Dip

Three relatively expensive large-cap stocks are on my buy list if their prices dip in the next market correction.

Read more »

Silver coins fall into a piggy bank.
Dividend Stocks

How I’d Invest $1,000 in October to Generate Passive Income for Life

You can earn reliable passive income each year by investing $1,000 in this Canadian dividend stock right now.

Read more »

Businessperson's Hand Putting Coin In Piggybank
Dividend Stocks

TFSA: Invest $45,000 in These 3 Stocks and Get $2,392 in Passive Income

Here are three of the best Canadian dividend stocks TFSA investors can consider buying right now to earn handsome passive…

Read more »

Modern buildings in business district
Dividend Stocks

3 REITs Offer a Good Mix of Growth Potential and Dividends

The real estate sector in Canada is still heading downwards, and the stocks are mimicking the pattern, so you can…

Read more »

potted green plant grows up in arrow shape
Dividend Stocks

2 of the Best Dividend Stocks to Buy for Growing Passive Income

If you're building a long-term portfolio, these two dividend stocks are some of the best investments to buy for growing…

Read more »

edit Woman calculating figures next to a laptop
Dividend Stocks

Create $500 in Tax-Free Passive Income With $0 in the Bank

Even if you don't have a cent to invest, you can start creating passive income to allow you to create…

Read more »

Dividend Stocks

Passive Income: 2 Dependable Dividend Stocks to Buy Today and Own Forever

Now’s a great time to think about building a passive-income stream. Here are two dividend stocks to have on your…

Read more »

Dividend Stocks

3 Dirt-Cheap TSX Stocks (With +5% Yields) to Buy Right Now

Here are three dirt-cheap TSX stocks that trade with elevated dividend yields and solid growth prospects ahead.

Read more »