TFSA Investors: Earn Passive Income With 3 Blue-Chip Stocks

TFSA investors can worry less about a recession and earn passive income with three blue-chip stocks as core holdings.

| More on:
A worker drinks out of a mug in an office.

Source: Getty Images

The S&P/TSX Composite Index posted positive returns from 2019 to 2021 — a low-interest rate period. Canadian stocks started strong in 2022 but eventually lost 8.66% overall due to rising interest rates. Some market experts said the TSX went cold because of the rate-hike cycles by the Bank of Canada (BOC).

BOC governor Tiff Macklem said the central bank would take a conditional pause after the recent rate hike. However, the door remains open to additional increases if inflation remains stubborn. But a market pullback is inevitable as long as inflation stays above the 2% target and more rate hikes become necessary.   

Tax-Free Savings Account (TFSA) investors should rethink their strategies if a repeat of last year happens. Make your move now and ensure you have high-quality assets in your TFSA. Three blue-chip stocks should be enough to weather one or more economic downturns.

Financial

Canadian Imperial Bank of Commerce (TSX:CM) may be the fifth-largest bank in Canada, but it’s a perfect holding in a TFSA, nonetheless. At $59.47 per share (+8.58% year to date), the dividend yield is an eye-popping 5.78%. The dividends should be safe and rock steady, given the low 48.95% payout ratio. Moreover, you can take comfort in CIBC’s dividend track record of 154 years.

Its president and chief executive officer (CEO) Victor Dodig said the $53.88 billion bank is well diversified and resilient and has the proven ability to navigate an uncertain operating environment. He added, “We enter the new fiscal year as a modern, relationship-oriented bank with a strong capital position.” In the last two fiscal years, CIBC’s average net income is $6.16 billion.

Communications services

BCE (TSX:BCE) isn’t immune from market headwinds, but it’s a defensive holding and stable business in the current economic environment. Like CIBC, the dividend track record of this telco giant and industry leader is more than a century (141 years). The 5G stock trades at $62.32 per share (+4.76% year to date), while the dividend yield is a lucrative 5.89%.

The $56.83 billion telecommunications and media company has generated an average of $23.4 billion in total revenue in the last three years. BCE’s balance sheet is healthy as ever. After three quarters in 2022, $3.5 billion of available liquidity is $3.5 billion, including $583 million in cash.

Management said the relatively low cyclicality for most of BCE’s revenues mitigates the financial impact of rising interest rates and macroeconomic uncertainty.

Energy

TC Energy (TSX:TRP) counts among the bellwether stocks in Canada’s oil and& gas midstream industry. While the stock isn’t a high flyer, it’s a Dividend Aristocrat. The $57.7 billion pipeline company has raised dividends for 21 consecutive years. At $57.70 per share (+6.89% year to date), you would delight in the 6.26% dividend yield.

Its president and CEO François Poirier said, “Demand for our services across our North American portfolio remains high, and we continue to see strong utilization, availability, and overall asset performance.” He expects the $34 billion in fully sanctioned secured capital projects to help deliver an annual dividend growth rate of 3-5%.

No-brainer buys

CIBC, BCE, and TC Energy are no-brainer buys and excellent sources of tax-free passive income if you’re holding them in your TFSA.  

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 Christopher Liew has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

More on Dividend Stocks

Hand arranging wood block stacking as step stair with arrow up.
Dividend Stocks

1 Growth Stock With Legit Potential to Outperform the Market

Identifying the stocks that have outperformed the market (in the past) is relatively easy, but selecting the ones that will…

Read more »

money cash dividends
Dividend Stocks

Passive Income: The Investment Needed to Yield $1,000 Per Annum

Do you want to generate a juicy passive-income stream? Here's a trio of stocks that can generate a yield of…

Read more »

Shopping card with boxes labelled REITs, ETFs, Bonds, Stocks
Dividend Stocks

Invest $10,000 in This Dividend Stock for $1,500.50 in Passive Income

If you have $10,000 to invest, then you likely want a core asset you can set and forget. Which is…

Read more »

IMAGE OF A NOTEBOOK WITH TFSA WRITTEN ON IT
Dividend Stocks

Here’s the Average TFSA Balance in 2024

The average TFSA balance has steadily risen over the last six years and surpassed $41,510 in 2023. Will the TFSA…

Read more »

potted green plant grows up in arrow shape
Dividend Stocks

TFSA Set and Forget: 2 Dividend-Growth Superstars for the Long Run

I'd look to buy and forget CN Rail (TSX:CNR) and another Canadian dividend-growth sensation for decades at a time.

Read more »

Caution, careful
Dividend Stocks

Here’s Why I Wouldn’t Touch This TSX Stock With a 50-Foot Pole

This TSX stock has seen shares rise higher, with demand for oil increasing, and yet the company could be in…

Read more »

Payday ringed on a calendar
Dividend Stocks

1 Passive-Income Stream and 1 Dividend Stock for $781.48 in Monthly Cash

Looking for passive income? Don't take out a loan with that high interest involved. Instead, consider this method for years…

Read more »

money cash dividends
Dividend Stocks

Pizza Stocks Are Actually Great for Passive Income: Who Knew?!

Pizza Pizza Royalty (TSX:PZA) may very well be the best inflation-fighting food stock out there on the TSX.

Read more »