TFSA Passive Income: 2 Stocks to Buy and Never Sell

These two passive-income stocks may not offer the highest dividend yield but certainly offer strong long-term returns for your TFSA!

Amy Legate-Wolfe

Amy became interested in investing in 2018 after having her first daughter. After receiving a masters degree in journalism from Western University, she became frustrated that the finance industry remained a confusing place for Canadians like her: new parents, millennials, and other young people who needed to understand their finances. Now, Amy focuses on tech companies and renewable energy for growth opportunities, coupling that with long-term investing strategies and equities. She also provides investors with a daily newsletter, Canada Stock Digest, for daily market updates. Before joining Motley Fool Canada, she wrote for major news organizations including HuffPost, CTVNews.ca, and CBC. When she’s not researching investing strategies, Amy’s time is pretty much monopolized by her two wild daughters, but in what little spare time she has she loves to do yoga, go on walks with her dog, and travel with her husband. Follow Amy on LinkedIn and Canada Stock Digest. Favorite Investment Quote: “October: This is one of the particularly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February.” – Mark Twain

Published October 4, 2023 7:00 pm EDT

| More on: FFHTFII

In the ever-evolving landscape of investment opportunities, the importance of a Tax-Free Savings Account (TFSA) cannot be overstated. TFSAs offer Canadians a tax-efficient way to grow their wealth over the long term.

Two stocks that have consistently demonstrated their potential for long-term growth and are well suited for inclusion in a TFSA are TFI International (TSX:TFII) and Fairfax Financial Holdings (TSX:FFH). In this article, we will delve into why these stocks are great choices for your TFSA, highlighting their impressive returns over the last few years and their commitment to dividend growth.

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TFI International

TFII stock, a leader in the North American transportation and logistics industry, has been on a remarkable journey of growth over the last few years. In the last year alone, shares are up 29% as of writing. This makes it an ideal candidate for a TFSA. The stock’s annualized return has consistently outpaced the broader market, showcasing its potential for long-term wealth creation. In addition, the company’s commitment to strategic acquisitions has contributed significantly to its growth trajectory.

One key factor that makes TFII stock attractive for a TFSA is its consistent dividend growth. While it might not be known as a high-yield stock, the company has steadily increased its dividend over the years. This dividend growth is particularly appealing for TFSA investors, as it allows for the tax-free compounding of dividends over time.

TFI International’s dividend payments have not only been consistent but also sustainable. This sustainability is crucial for long-term TFSA investments, as it ensures a steady stream of tax-free income that can be reinvested to accelerate wealth accumulation. It currently offers a dividend yield of 1.08% as of writing.

Moreover, TFII stock’s industry-leading position and its focus on efficient operations make it a resilient choice for a TFSA. The company’s diverse range of services, including truckload and less-than-truckload transportation, logistics, and package and courier delivery, provides it with a robust revenue stream that can weather economic downturns.

Fairfax stock

Fairfax stock, led by renowned investor Prem Watsa, is another compelling choice for a TFSA. This financial services conglomerate has a long history of delivering value to its shareholders and is well positioned for the decades to come.

Over the last few years, Fairfax stock has consistently outperformed many of its peers in the financial sector. The company’s commitment to disciplined underwriting and a diversified investment portfolio has enabled it to navigate through market volatility successfully.

One of the key attractions of Fairfax stock for TFSA investors is its history of delivering substantial returns. The company’s stock has not only appreciated in value but has also rewarded shareholders through dividend payments. Fairfax has a track record of increasing its dividend, making it a reliable source of tax-free income within your TFSA.

Additionally, Fairfax stock’s focus on long-term value creation aligns well with the goals of TFSA investors. The company’s investment philosophy emphasizes a value-oriented approach and a focus on capital preservation, which can help mitigate the risks associated with market fluctuations.

Fairfax stock’s diverse portfolio of insurance, reinsurance, and investment businesses further enhances its appeal for a TFSA. This diversification allows the company to capitalize on opportunities in various market conditions and positions it for steady growth over the long term. Add in a 1.21% dividend yield, that it trades at 8.93 times earnings, up 74% in the last year alone, and it’s a sure-fire winner.

Bottom line

In conclusion, TFII stock and Fairfax stock are excellent choices for investors looking to build wealth within their TFSA. Both companies have demonstrated impressive returns over the last few years, showcasing their potential for long-term growth.

Moreover, their commitment to dividend growth provides a reliable source of tax-free income for TFSA investors. As these companies continue to excel in their respective industries, they offer a compelling combination of growth and income potential that can be held for decades, making them valuable additions to any TFSA portfolio.