2 Great Dividend-Growth Stocks to Stash in a TFSA for Decades

CN Rail (TSX:CNR) and another dividend grower look cheap enough to own in a TFSA value fund for the long haul.

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When it comes to your TFSA (Tax-Free Savings Account), it can pay huge dividends to think longer term. Indeed, too much trading within your TFSA could get you labelled as conducting business trading activities by the CRA (Canada Revenue Agency). The TFSA is meant to build wealth over the long haul, not for trading at a blistering pace.

The TFSA seems perfect for the sit-on-your-bum type of investment strategy, whereby one buys a stock and holds it for many, many years. Heck, even decades is a good timespan to invest for if you’re able. Of course, it’s hard to hold just any company, given the rapid pace of technological change that stands to disrupt various business models.

The wider the moat, the better

That’s why TFSA investors should insist on wide-moat companies that have long dividend-growth streaks. The more predictable the business and its cash flows, the better, and the most attractive, I believe, it stands to be as a core holding for a TFSA portfolio aimed at producing big wealth over the extremely long term.

In this piece, we’ll check out two dividend-growth stocks that may be fine buys, not just for years but many decades! Indeed, financial circumstances can change unexpectedly, causing one to sell one of their core holdings.

That said, pending such an occurrence, the following two names certainly seem to get better with age. Every raise to the dividend payout and every rally higher only stands to help your TFSA wealth compound, perhaps at an enviable rate. So, while others speculate on the hot stock of the week, consider the following two dividend growers as prime TFSA candidates.

Canadian Tire

Canadian Tire (TSX:CTC.A) is a historic retailer that’s really done a great job of modernizing its business with the digital sales channel and the Triangle loyalty rewards program. Additionally, Canadian Tire has a pretty good batch of exclusive brands, many of which you cannot find in other stores in the country. As more brand opportunities present themselves, I’d look for Canadian Tire to put its cash to work.

The push into pet food has been intriguing. The same goes with party supplies and other products you normally wouldn’t think of when you go into a Canadian Tire. As discretionary spending recovers, I find Canadian Tire could be one of the retail plays that could rocket higher.

Today, the dividend yield is at 5.17%, close to the highest it’s been in a long time. I expect the dividend to keep growing at a steady pace, whether or not a spending boom hits in the next 18 months. All considered, Canadia Tire looks like a dividend grower to hang onto through the tough terrain.

CN Rail

CN Rail (TSX:CNR) stock is another healthy dividend grower that looks to have gone on sale in late June. The stock is off 11% from its recent high, and for really no good reason. With a 2.1% dividend yield, a super-long track record of dividend hikes, and a mere 18.9 times trailing price-to-earnings multiple, the summer seems like a great time to consider CNR stock for a TFSA.

Indeed, CN Rail will chug higher again, even if the latest correction has room to run lower. Either way, the pullback to $160 looks like more of a gift than a red flag, especially as Canada’s economy isn’t as bad a shape as you’d think.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Joey Frenette has positions in Canadian National Railway. The Motley Fool recommends Canadian National Railway. The Motley Fool has a disclosure policy.

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