Your TFSA (Tax-Free Savings Account) is meant for building wealth over the long haul. What it’s not meant for is chasing quick bucks by trading. Indeed, we’ve heard a lot of TFSA investors getting hefty tax bills for excessive trading within their TFSAs. In any case, most new investors shouldn’t be inclined to trade. They should be in it for the long haul to minimize the risks that accompany getting in and out of stocks in a hurry.
To unlock the full potential of your TFSA, you should look to the stocks of stellar companies and look to hang onto them for years or even decades at a time. That way, you won’t get dinged for excess trading or suffer a quick loss that you can’t use to offset gains in any of your non-registered accounts.
It’s better to think of your TFSA retirement fund as more of a potted plant that requires you to add water gradually over time. Sure, you may need to trim the odd weed that grows. But, for the most part, your TFSA shouldn’t require your constant attention. Heck, you may not even need to monitor it on a week-to-week basis, provided you purchased fundamentally sound investments at reasonable multiples.
Growing your TFSA prudently with dividend juggernauts
In this piece, we’ll focus on the dividend heavyweights that can help your TFSA portfolio grow at a rapid rate over the years. When you reinvest dividends, you can benefit from the profoundly powerful effects of long-term, tax-free compounding.
The power of compounding helped investment legends like Warren Buffett accumulate considerable sums of wealth over time. When you take taxes out of the equation, the wealth-creative effects are that much more prominent. That’s why your TFSA is such a powerful tool, which, when implemented optimally, can help you meet your long-term financial goals a heck of a lot sooner than you’d think.
Consider CN Rail (TSX:CNR) and Restaurant Brands International (TSX:QSR): two simple dividend growers that I’d stash in a TFSA and forget about.
CN Rail
CN Rail stock is one of the best TFSA core holdings to consider whenever it falls to a reasonable multiple. Today, the stock trades at around 22.15 times trailing price to earnings (P/E). That’s pretty in line with historical averages and perhaps skewed on the high side. With a recession potentially on the horizon, CN Rail may have a rocky ride, but don’t count on the rail kingpin to be derailed.
With a wide moat and a very smart new chief executive officer in Tracy Robinson, an argument can be made that CN Rail stock is well worth a premium to the rail peer group. Over the past five years, shares have surged over 70%. All the while, the dividend has grown at a very steady and consistent rate. With a 1.92% dividend yield, I’d look to nibble into a partial position today.
Restaurant Brands International
Restaurant Brands is a fast-food firm behind such names as Tim Hortons, Burger King, Popeyes, and Firehouse Subs. Relative to peers, QSR stock has been an underperformer. Still, there are reasons to believe that the bad streak won’t last forever, especially as the firm takes its Burger King turnaround plan into high gear.
With industry legend Patrick Doyle helping Burger King become great again in the U.S. market, I think QSR is an underdog that could easily pull ahead of rivals as the recession touches down this year.
Burger King’s U.S. president told CNBC that its recent efforts are already starting to pay off. Burger King is selling more whoppers, and this could just be the start. As Burger King makes up for lost time, I see no reason why QSR’s other chains (think Tim Hortons) can’t also reinvent themselves. With a 3.24% yield, I remain a raging bull on QSR for any long-term-focused TFSA fund.
