The TSX today has finally seen some positive movement after plunging through most of March. Yet if you think this could be a sign that the end is near for Tax-Free Savings Account (TFSA) investors, I wouldn’t believe that quite yet.
The TSX today is still down by about 10% in the last year alone, and that’s definitely nowhere near recession territory. While we still haven’t hit an official recession, it’s clear that one is on the way. While economists predicted this to be early 2023, they now predict mid-2023. So, we still have some time to go before seeing shares drop even further.
If that happens, TFSA investors would do well to consider finding strong stocks to buy for huge returns. Better still, these would be stocks they could hold for decades. And these are the two I would choose on the TSX today.
TD stock
Some of the worst performers during a recession tend to be financial institutions. However, over time, these are some of the best and most stable performers. You can look to past performance to see just how well the Big Six banks have done again and again, even after a recession.
Toronto-Dominion Bank (TSX:TD) is a prime example. Shares drop when the company reports that earnings aren’t doing well with loan losses. However, the bank has provisions for loan losses, allowing it to recover after these trying times.
Let’s look back at how TD stock performed between the last two recessions. After falling 44% between April and September of 2002, shares of TD stock rose 217% before the next recession started in 2008. Even as shares of TD stock plunged an incredible 58% from peak to trough during that time, they were still higher than the lows of 2002.
If you were to pick up TD stock should it fall even further, and it likely will, you can be sure that even by the next recession, you’ll still trade in the black. Meanwhile, you’ll receive steady income from a dividend yield at 4.94% as of writing.
Canadian Utilities
Another area where I would seek out stable growth and income during a recession is through utilities. These companies have cash coming in no matter what, as we all need to keep the lights on. However, again, shares climbed and then dropped for companies like Canadian Utilities (TSX:CU), as TFSA investors and others sought ways to keep cash safe.
Yet again, Canadian Utilities stock has proven that it’s a strong choice during and after a recession. The utilities stock fell 35% during the last recession, before climbing to where it is now, up 105% since 2009. While it saw a drop during the pandemic, and it’s down 14.5% from 52-week highs, it still could certainly drop more if a recession hits.
This is why I would certainly pick it up during that time. After all, it’s still the only Dividend King on the TSX today for TFSA investors to consider. That’s 50 years of consecutive dividend growth. You can now pick it up with a yield at 4.88% as of writing, which doesn’t look like it will be cut back anytime soon.
