TFSA Investors: Steady Utility Stocks to Buy Now and Cash In for Life

Steady and reliable investments become a rarity in volatile market conditions, but these utility stocks could be the pillars of stability you might need in a TFSA for the long run.

| More on:
The sun sets behind a power source

Source: Getty Images

Stock market investing can be an exciting way to become wealthy, but it takes time and discipline to grow your wealth as an investor. The ongoing volatility in the stock market clearly shows how much risk stock market investing can entail.

As of this writing, the S&P/TSX Composite Index is down by 9.18% from its 52-week high but up by 10.06% from its July 14, 2022, level, and there’s no telling how the next few weeks will fare for the stock market.

With tons of uncertainty and the possibility of a recession on the horizon, it’s necessary to make adequate defensive investments to protect your investment capital. Buying and holding defensive stocks in a Tax-Free Savings Account (TFSA) can be an excellent way to achieve long-term wealth growth and balance your portfolio to mitigate losses during market downturns.

Utility businesses are the pillar of stability in the stock market. Choosing the right utility businesses and investing in their shares can be an ideal way to fortify your investment portfolio. Today, I will discuss two utility stocks you can add to your TFSA portfolio for this purpose.

Fortis

Fortis (TSX:FTS)(NYSE:FTS) is a $28.39 billion market capitalization utility holdings company that owns and operates several natural gas and electricity utility businesses across Canada, the U.S., the Caribbean, and Central America.

The company generates almost its entire revenue through highly rate-regulated and long-term, contracted assets. It generates predictable cash flows its management can use to comfortably fund capital programs and grow shareholder dividends.

As of this writing, Fortis stock trades for $59.31 per share and boasts a 3.61% dividend yield. It is one of the most reliable dividend stocks on the TSX right now. The “Canadian Dividend Aristocrat has been increasing shareholder dividends for the last 48 years, and it looks well positioned to continue doing that for the next few years.

The essential nature of its services virtually guarantees stable and predictable cash flows for years. It could be an excellent foundational investment in a TFSA portfolio.

Algonquin Power & Utilities

Algonquin Power & Utilities (TSX:AQN)(NYSE:AQN) is a $12.61 billion market capitalization Canadian regulated utility conglomerate. The company owns and operates regulated assets diversified across North America.

Its utility business gives Algonquin the stable cash flows necessary to qualify as a defensive stock. Unlike many other utility businesses, Algonquin also owns an extensive portfolio of renewable energy assets that give it significant growth potential.

As of this writing, Algonquin stock trades for $18.60 per share and boasts a juicy 4.96% dividend yield. ESG investing is becoming increasingly popular as the world slowly moves toward a greener future. With 70% of its operations in its utility segment, you can rely on the company as a defensive asset.

Additionally, its utility segment gives you a ton of long-term growth potential. It could be an excellent investment to buy and hold in a TFSA for tax-free wealth growth.

Foolish takeaway

Investing in relatively safer and reliable dividend stocks is an excellent way to use the contribution room in a TFSA. You can use the dividend income to line your account balance with extra cash that can grow without incurring taxes to supplement your monthly income.

If you don’t need the money immediately, you can reinvest the shareholder dividends to add more shares of dividend stocks to your portfolio. Reinvesting the dividends can help you unlock the power of compounding to accelerate your long-term wealth growth.

Fortis stock and Algonquin stock can be excellent investments for this purpose.

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 recommends FORTIS INC.

More on Dividend Stocks

Payday ringed on a calendar
Dividend Stocks

How Much to Invest to Get $500 in Dividends Every Month

These three monthly paying dividend stocks could help you earn over $500 monthly in passive income.

Read more »

Piggy bank with word TFSA for tax-free savings accounts.
Dividend Stocks

TFSA Maxed Out? Here Are 5 Other Ways to Grow Your Wealth in Canada

Canadians have other options to grow wealth after maxing out their TFSA contribution limits.

Read more »

A man smiles while playing a video game.
Dividend Stocks

RRSP: 2 High-Yield Dividend Stocks to Consider Now

These top TSX dividend stocks offer attractive yields today for RRSP investors.

Read more »

edit Sale sign, value, discount
Dividend Stocks

2 Bargain Stocks You Can Buy Today and Hold Forever

These two stocks are reliable and trade ultra-cheap, making them among the best TSX stocks to buy now and hold…

Read more »

Person holds banknotes of Canadian dollars
Dividend Stocks

Top 3 Dividend Stocks Yielding Over 7% to Buy in June 2024

Are you looking for the best of the best dividend stocks? These three are the ones that belong on your…

Read more »

Dividend Stocks

RRSP Investors: Buy These Top Dividend Stocks for Total Returns

RRSP investors can consider adding blue-chip dividend stocks such as Tourmaline Oil to their equity portfolios in 2024.

Read more »

Payday ringed on a calendar
Dividend Stocks

This 8.9 Percent Dividend Stock Pays Cash Every Month

You can forget about risks related to short-term market volatility and buy this high-yield monthly dividend stock to expect solid…

Read more »

Dividend Stocks

How to Build a Monthly Passive-Income Stream With Canadian REITs

These two monthly dividend stocks will create passive income you can live off of for life, and now is the…

Read more »