TFSA Growth: 3 Safe Dividend Stocks to Turn $30K Into $2.5 Million by Retirement

Here’s how Motley Fool investors can use their TFSA to create wealth for retirement, all from safe TSX dividend stocks.

Amy Legate-Wolfe

Author Bio Amy became interested in investing in 2018 after having her first daughter. After receiving a masters degree in journalism from Western University, she became frustrated that the finance industry remained a confusing place for Canadians like her: new parents, millennials, and other young people who needed to understand their finances. Now, Amy focuses on tech companies and renewable energy for growth opportunities, coupling that with long-term investing strategies and equities. She also provides investors with a daily newsletter, Canada Stock Digest, for daily market updates. Her work can also be found at Canada's National Observer, where she writes on the business side of climate action. Before joining Motley Fool Canada, Amy wrote for major news organizations including HuffPost, CTVNews.ca, and CBC. When she’s not researching investing strategies, Amy’s time is pretty much monopolized by her two wild daughters, but in what little spare time she has she loves to do yoga, go on walks with her dog, and travel with her husband. Social Media Follow Amy on LinkedIn and Canada Stock Digest. Favorite Investment Quote “October: This is one of the particularly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February.” – Mark Twain

Published August 8, 2022 1:30 pm EDT

Motley Fool investors are investing more into self-directed portfolios. That move has especially been true for Canadians who are investing over the internet, and in their Tax-Free Savings Account (TFSA). An income-generating strategy many have adopted is investing in dividend stocks and reinvesting dividends in shares to create long-term wealth. Wealth that could turn you into a millionaire by retirement.

With that in mind, here are three dividend stocks that you can look forward to growing for decades. All with historical growth that will keep your savings safe.

A utility leader

There are a number of great utility stocks out there for your TFSA, but if you’re looking at dividend stocks I would consider Canadian Utilities (TSX: CU). This company is the only Dividend King on the TSX today. Motley Fool investors can therefore look back on 50 years’ worth of consecutive dividend growth.

The utility company is coming off the back of a strong earnings report, which announced adjusted earnings of $136 million, an 18.2% increase year-over-year. Further, it announced a partnership with Canadian Pacific Railway (TSX: CP)(NYSE: CP) to create two hydrogen production and refueling facilities in Alberta.

Canadian Utilities is one of the dividend stocks offering an attractive yield of 4.45% for your TFSA. It has increased that dividend by a compound annual growth rate (CAGR) of 8.2% per year over the last decade. Meanwhile, shares have grown at a CAGR of 1.3% during that time. With dividends reinvested, a $10,000 investment could be worth $213,742 in 25 years.

A railway on a roll

You may have become aware of the drama surrounding Canadian Pacific Railway over the last year or so. But that’s almost behind the company, and CP stock is now one of the dividend stocks looking towards the future. Now that it’s almost a certainty the company will acquire Kansas City Southern, it has started new ventures, such as the hydrogen business with Canadian Utilities.

That alone is something that warrants investor attention for dividend growth for your TFSA. The railway continues to introduce hydrogen-fuelled railway cars, showing its movement towards the large opportunity in renewable energy. But right now, Motley Fool investors can benefit from the increase in its transport business, with revenue up 7% year-over-year.

The company offers a 0.73% dividend yield, so not high it’s true. Plus it was cut back due to the investment in Kansas City. But with more growth on the way, investors are likely to see that dividend come back stronger than ever. Plus, shares are up 575% in the last decade for a CAGR of 23%, and it still offers a dividend CAGR of 12.5%. A $10,000 investment with dividends reinvested could grow to $2,079,384 in 25 years!

The biggest player in 5G

The move to fibre-to-the-home and 5G has led BCE (TSX: BCE)(NYSE: BCE) into a top position it’s unlikely to give up. The telecommunications company saw many new work-from-home workers choose it during the pandemic. It now offers incredibly fast internet and 5G for wireless use, ahead of its competitors.

During BCE’s latest earnings report, the company showed why it is one of the dividend stocks likely to deliver more and more growth for your TFSA. Its adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) is up 4.6% year-over-year. Further, the momentum in customers choosing the company continued, with mobile phone subscribers up 139.5% year-over-year.

Canada’s largest communication company, one of the oldest companies in Canada, offers a solid 5.68% dividend yield. That dividend has grown at a CAGR of 5.5% in the last decade, with shares up by a CAGR of 9.3% during that time. A $10,000 investment with dividends reinvested could be worth $250,202 in 25 years.

Bottomline

While there’s no guarantee past performance will continue, historical data can give us a clue as to how all three of these safe dividend stocks could perform. All have been around for decades, and are more than likely to be here for decades more.

So, by investing only $10,000 in each and reinvesting in these dividend stocks, Motley Fool investors could have a TFSA worth $2,543,328 in just 25 years!