Since you pay no tax inside the TFSA (Tax-Free Savings Account), it is the ideal place to grow streams of investment passive income. All the income you earn inside the TFSA can be re-invested into buying more stocks.
As you accumulate more stocks, you also accumulate more dividend income. The fact that you get to keep all your income means you can compound your passive income even faster. If you like the idea of compounding passive income in your TFSA, here are four stocks to simply buy and hold for years to come.
A TFSA stock that keeps chugging away
Canadian National Railway (TSX:CNR) has an incredible dividend history. This stock has grown its dividend annually since 1996! While it only yields 1.98% today, it has increased its dividend by over 12% a year for two decades. If you want to compound your capital and income, CNR is a great TFSA stock.
2023 has been a tough year for CN. The economy is slowing, and external factors (fires, floods, and strikes) have caused transport volumes to slow. While this isn’t ideal, it appears the market is giving it a near-term pass (the stock is only down 2% this year).
At 20 times earnings, the valuation of CN stock is relatively attractive (especially compared to its closest competitor, CP Rail), and now could be a good time to add a position.
A beaten-up, high-quality dividend stock
goeasy (TSX:GSY) is another dividend stock that has compounded great returns over long periods. Its stock has earned a 1,090% total return over the past 10 years! Its stock yields 3.1% right now. It has grown its dividend by a 27% compounded annual rate over the decade.
goeasy has become one of the largest non-prime lenders in Canada. Not only is it geographically diversified, but its array of products has expanded significantly over the past few years.
While it may seem counter-intuitive, the sub-prime market segment tends to be very resilient, even during recessions. This TFSA stock has sold off 40% since 2021, and it only trades for eight times earnings today. For growth and income, goeasy might be one of Canada’s best stocks.
A TFSA stock for defensive growth and income
For defence, growth, and income, Brookfield Infrastructure Partners (TSX:BIP.UN) is a stock to hold in a TFSA for years. Brookfield has a portfolio of forever assets. These assets include ports, pipelines, transmission lines, home utilities, gas processing plants, data centres, and cellular towers.
These are economically essential assets. They largely have long-term contracts that are indexed to inflation. That provides internal growth. However, the company also has a knack for re-investing excess profits to acquire excellent assets.
Today, BIP stock yields 4.3%. It has grown its dividend by around 7% per year for the past decade. For a utility-like stock with outsized growth, this is great lifetime TFSA stock to hold.
An oil stock with a great past and a strong future
Canadian Natural Resources (TSX:CNQ) has already delivered two decades of +20% annualized dividend growth. The fact that CNQ has three decades of energy reserves should help ensure many years of future dividend growth.
CNQ is an incredibly well-managed company. Even though it is dependent on energy prices, the company has been built to ride through every market cycle.
Today, CNQ stock trades with a 4.5% dividend yield. Don’t forget that this company has issued a special dividend or two in the past. So, for extra passive income that can help grow a passive, CNQ is certainly one to hold for a long time ahead.
