5 Dividend Stocks for Life-Long TFSA Income

These five stocks could create huge change.

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 August 12, 2024 8:45 pm EDT

A significant portion of Canadian investors may not be using their Tax-Free Savings Account (TFSA) to the fullest. In fact, surveys indicate that around 40% of Canadians hold cash or cash-equivalent investments, such as savings accounts or Guaranteed Investment Certificates, as the primary assets in their TFSAs. Today, let’s get right into it with five stocks that could create huge change.

Pile of Canadian dollar bills in various denominations — Source: Getty Images

Suncor

Suncor Energy (TSX:SU) stands out as a compelling dividend stock for several reasons. First, there’s value. The company’s trailing price-to-earnings (P/E) ratio of 9.36 and forward P/E ratio of 10.56 indicate a pretty attractive valuation, especially when considering its profitability metrics. Suncor boasts a healthy profit margin of 14.87%. Plus, with a return on equity of 17.68%, Suncor stock effectively utilizes shareholder capital to generate robust returns, making it an appealing option for dividend-focused investors.

As for the dividend, it offers a forward annual dividend yield of 4.00% as of writing. Suncor has a history of stable dividend payments, supported by a sustainable payout ratio of 37.03%. And yet, with a 52-week price change of 28.5%, Suncor’s stock has shown solid performance. Add in institutional ownership of 73.76%, and the company holds many long-term prospects for a TFSA.

Waste Connections

Waste Connections (TSX:WCN) is another compelling dividend stock, especially for those seeking stability and consistent returns in a low-beta environment. Despite its premium valuation, Waste Connections has a solid profitability profile, with a return on equity of 11.14%. This shows its effective management and efficient capital use. Furthermore, the company’s 52-week price change of 30% and low beta of 0.71 make it an attractive option.

Then there’s the dividend. While offering a modest yield, it’s backed by strong financials and prudent management. The company provides a forward annual dividend yield of 0.63%, with a sustainable payout ratio of 33.33%, ensuring that the dividend is well-covered by earnings. It also provides a solid operating cash flow of $2.21 billion. These both provide confidence in the company’s ability to maintain and potentially grow its dividend over time.

CCL Industries

CCL Industries (TSX:CCL.B) offers a blend of solid financial performance and consistent dividend payouts. The company’s trailing P/E ratio of 19.66 and forward P/E ratio of 17.42 reflect a reasonable valuation for a company with a 52-week price change of 21% as of writing. CCL’s profitability is underscored by a profit margin of 9.80%, showing its ability to generate consistent earnings.

CCL offers a forward annual dividend yield of 1.57%, which is slightly above its trailing yield of 1.49%. The company’s five-year average dividend yield of 1.42% demonstrates its commitment to returning value to shareholders. And with a payout ratio of just 29.52%, CCL maintains a conservative approach to its dividend payments. The company’s strong operating cash flow of $1.06 billion and a current ratio of 1.96 further support its ability to sustain and potentially increase its dividends over time.

Manulife

Manulife Financial (TSX:MFC) is another attractive dividend stock on the TSX, with a forward P/E ratio of 9.35, making it an appealing option for value-conscious investors. The company’s profitability, highlighted by a profit margin of 17.34%, underscores its ability to generate steady income and keep dividends high.

That dividend is now at a 4.65% yield, making it an attractive choice for income-focused investors. The company has a history of maintaining a solid dividend yield, with a five-year average of 5.01%, reflecting its commitment to returning capital to shareholders. Manulife’s robust operating cash flow of $23.52 billion provides strong coverage for its dividend, ensuring reliability.

Pembina

Finally, we have Pembina Pipeline (TSX:PPL), an excellent dividend stock on the TSX, driven by its solid financial performance and attractive yield. The company’s trailing P/E ratio of 16.29 and forward P/E ratio of 16.08 indicate a stable valuation. Pembina’s profitability is highlighted by a profit margin of 20.60%, reflecting its efficient operations and strong revenue generation.

Pembina offers a forward annual dividend yield of 5.2%, supported by its strong $2.91 billion cash flows. Although the payout ratio is on the higher side at 82.59%, Pembina’s significant $1 billion free cash flow provides confidence in its dividend. The stock’s 52-week change of 26.34% and a beta of 1.48 also indicate that Pembina not only offers an attractive yield but also has the potential for capital appreciation.