In my opinion, every Canadian should open Tax-Free Savings Account (TFSA). As its name suggests, any gains generated in a TFSA can be withdrawn tax free. Over time, that could help investors snowball their accounts much faster, helping them achieve financial independence.
One constraint that comes with TFSAs is that Canadians are limited in terms of how much money they can contribute into one of these accounts. Thankfully, that limit continues to increase every year. In 2023, Canadians were given an additional $6,500 of contribution room to work with. If that contribution room is allocated towards strong dividend stocks, investors could see a nice chunk of dividends come their way. In this article, I discuss two top TSX dividend stocks for your $6,500 contribution room.
Start with the best
When it comes to dividend stocks, Fortis (TSX:FTS) remains one of the most attractive companies around. For those that are unfamiliar, this company provides regulated gas and electric utilities to more than three million customers across Canada, the United States, and Caribbean. Due to the nature of its business, Fortis’s revenue is very stable and predictable. That allows the company to plan its dividend distributions far in advance of the actual distribution date.
Speaking of its dividend, Fortis has made a name for itself among dividend investors due to its long history of raising its distribution. In fact, the company holds the second-longest active dividend-growth streak in Canada at 49 years. Fortis has already announced its plans to continue raising its dividend at a rate of 4-6% through to at least 2027. If you’re looking for a strong dividend stock, consider buying Fortis in your TFSA.
This long-paying dividend stock is worth a buy
Although Bank of Nova Scotia (TSX:BNS) doesn’t boast the same kind of dividend-growth streak as Fortis, it does shine in another aspect. This company has paid shareholders a portion of its earnings for nearly 190 consecutive years. That’s very impressive considering how many recessions and economic downturns the company has had to endure over that period. The fact that Bank of Nova Scotia has never had to suspend its dividend for nearly two centuries shows that the company prioritizes its distribution.
One of the Big Five Canadian banks, Bank of Nova Scotia stands out from its peers due to its focus on international growth. Earning the title of Canada’s most international bank, Bank of Nova Scotia could set itself up to become Canada’s largest banking entity by the end of the decade. With that said, investors could buy shares of Bank of Nova Scotia for its growth potential in addition to its appeal as a strong dividend stock.
Foolish takeaway
A TFSA can be an excellent tool that could help investors achieve financial independence. By investing in strong dividend companies in a TFSA, investors could create a stable source of income without having to pay any taxes on top of that. Fortis and Bank of Nova Scotia would be my two top picks for your $6,500 contribution room in 2023.
