TFSA Pension: 2 TSX Dividend Stocks to Buy Now and Hold for Decades

These top TSX stocks pay great dividends and look cheap to buy right now for a TFSA retirement fund.

| More on:
TFSA and coins

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

Canadian investors are using their TFSA to build self-directed retirement funds. The pullback in the TSX Index is providing an opportunity to buy top dividends stocks at undervalued prices.

BCE

BCE (TSX:BCE)(NYSE:BCE) trades for close to $63.50 per share at the time of writing compared to $74 a little more than two months ago. The drop in the share price looks overdone, and investors can now pick up a solid 5.8% dividend yield and look forward to steady dividend growth.

BCE provides internet and mobile communication services that businesses and households need regardless of the state of the economy. The market correction that occurred in recent months is due to rising fears that the economy is headed for a recession. A slowdown is expected, as inflation hits consumers and rising interest rates designed to reduce inflation drive up borrowing costs.

In this environment, it makes sense to search for defensive stocks like BCE that have stable revenue streams.

This doesn’t mean BCE is recession-proof. Its media business would likely see a dip in ad spending during an economic downturn, and product sales could slip as people and businesses decide to keep using older phone models. The bulk of the revenue stream, however, should be insulated from recessionary pressures. Even the TV subscriptions would likely outlast most other discretionary spending.

BCE is investing billions of dollars in network upgrades. The company plans to connect another 900,000 buildings with fibre optic lines in 2022 and is expanding the 5G mobile network. These programs should support revenue and profit growth.

BCE still has excess cash to cover the generous dividend. Free cash flow is expected to grow by 2-10% in 2022.

TD Bank

TD (TSX:TD)(NYSE:TD) is leader in the Canadian banking sector and is poised to become a much larger player in the American market.

The bank is in the process of buying First Horizon for US$13.4 billion in a deal that will add more than 400 branches to the existing U.S. business and make TD a top-six bank in the United States. TD already has a presence all along the east coast from Maine to Florida. First Horizon operates in the U.S. southeast, including the sunshine state, so the acquisition should be a good fit.

TD raised the dividend by 13% late last year. It was the only big Canadian bank that didn’t hike the payout when the fiscal Q2 2022 results came out, but investors should see another generous increase for 2023. TD has one of the best dividend-growth rates in the TSX over the past two decades.

The stock appears undervalued right now. TD trades for close to $85 compared to the 2022 high around $109.

Investors who buy at the current level can pick up a solid 4% dividend yield.

The bottom line on top dividend stocks for a TFSA

BCE and TD look cheap right now and offer attractive dividends that should continue to grow. If you have some cash to put to work in a self-directed TFSA focused on passive income, 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 has no position in any of the stocks mentioned. Fool contributor Andrew Walker owns shares of BCE.

More on Dividend Stocks

Young woman sat at laptop by a window
Dividend Stocks

TFSA Passive Income: 1 Great Canadian Dividend Stock That Still Looks Cheap

This top Canadian energy stock pays a great base dividend and is giving investors generous bonus payouts.

Read more »

Target. Stand out from the crowd
Dividend Stocks

Have $1,000? 2 Stocks to Buy at the Real Estate Bottom

Many real estate stocks offer both dividends and decent growth potential. And if you grab them at a discount, you…

Read more »

Increasing yield
Dividend Stocks

3 High-Yield Dividend Stocks to Buy and Hold Forever

Young and old income investors can sleep easy by holding three high-yield dividend stocks for the long term, if not…

Read more »

Dividend Stocks

1 Under-the-Radar Dividend Stock to Buy for Monthly Passive Income

This dividend stock offers investors a whopping 9.02% dividend yield that's remained stable for over a decade.

Read more »

oil and natural gas
Dividend Stocks

Passive Income: 4 TSX Energy Stocks With Incredible Dividends

TSX energy stocks are gushing cash. Here are four top stocks to own for a combination passive income and capital…

Read more »

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 »