The TSX has been on an upward swing for several weeks and shows no signs of slowing down anytime soon as 2024 nears its end. The S&P/TSX Composite Index, the benchmark index for the Canadian stock market, is at new all-time highs.
Depending on how elections go across the border in the U.S., there might be significant volatility ahead in the stock market. Combined with a potential Santa Claus rally, there’s no way to determine what the market holds in the coming weeks.
Investing in dividend stocks when share prices are down can be an excellent way to lock in high-yielding payouts before the rally deflates dividend yields. As interest rates come down, the rally seems likely to continue. It might be a good idea to buy shares of dividend stocks to take advantage of inflated dividends and capital gains.
Today, we will look at two dividend stocks that might warrant a place in your investment portfolio.
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Canadian Imperial Bank of Commerce
Canadian Imperial Bank of Commerce (TSX:CM) is a Canadian bank with a $77 billion market capitalization headquartered in Toronto. The multinational banking and financial services corporation is one of Canada’s Big Six banks that has historically traded at a discount compared to its peer group.
CIBC has more significant exposure to the domestic mortgage market, and Canada’s frothy housing market makes it a concern for some considering the stock as a long-term investment.
However, key interest rates going down might make its exposure to the housing market a good thing for investors. Lower rates will mean more economic activity, resulting in more growth for the bank.
As of this writing, CIBC stock trades for $81.52 per share and boasts a 4.42% dividend yield. As market activity picks up the pace with further interest rate cuts, 2025 might see CIBC rally to new all-time highs.
Hydro One
Hydro One (TSX:H) is a $26.3 billion market capitalization utility company headquartered in Toronto. The company operates regulated transmission and distribution assets across Ontario.
It is the area’s largest electricity provider with almost 1.5 million customers. Without much competition, it gives investors an edge in seeking stable and growing passive income over time.
The company’s regulated business model ensures predictable revenue, a major factor for investors seeking low-volatility, long-term investments.
Hydro One has also been reporting good revenue growth. In its most recent earnings report, the company posted a 9.4% year-over-year growth in revenue. As of this writing, Hydro One stock trades for $43.84 per share and boasts a 2.87% dividend yield.
Foolish takeaway
Investing in dividend stocks and storing them in a Tax-Free Savings Account (TFSA) can be an excellent way to make the most of your investment returns. The returns from your holdings in a TFSA are not taxable for interest, dividends, or capital gains.
Allocating a portion of your contribution room to buy and hold dividend stocks can let you enjoy the returns from capital gains and dividends without taxes.
To this end, CIBC stock and Hydro One stock can be great holdings to add to your TFSA portfolio.
