When investing your $7,000 Tax-Free Savings Account (TFSA) contribution, it’s crucial to focus on dividend stocks that offer a strong history of payouts, stable growth, and future potential. And today, that’s exactly what we’re focusing on. Each brings unique advantages to your portfolio, from utility stability to real estate income and long-term industrial growth. Let’s explore why these are your best bets this year.
Hydro One
Hydro One (TSX:H) is a leading utility company in Ontario, primarily dealing with electricity transmission and distribution. As a utility, Hydro One benefits from the consistent demand for energy, making its business model relatively recession-proof. In the most recent earnings report for Q2 2024, Hydro One reported 10.2% year-over-year earnings growth, thus reflecting its strong financial position. The stock’s dividend yield of 2.7% and payout ratio of around 64% show that Hydro One is committed to rewarding investors without overextending its balance sheet. With stable management and a focus on sustainable energy, Hydro One’s long-term growth is underpinned by its essential role in Ontario’s infrastructure.
Granite REIT
If you’re looking for exposure to real estate, Granite REIT (TSX:GRT.UN) is one of Canada’s top industrial real estate investment trusts (REITs). Known for its focus on industrial and logistics properties, Granite REIT has benefited significantly from the rise of e-commerce. In its most recent earnings for Q2 2024, Granite reported 7.6% year-over-year revenue growth, supported by a diversified portfolio across Canada, the U.S., and Europe. With a solid dividend yield of 4.3%, it’s a fantastic income generator. Plus, Granite REIT has a history of increasing its dividends over time, making it a reliable player in the long term, especially with rising demand for industrial real estate spaces.
Canadian National Railway
Canadian National Railway (TSX:CNR) is one of North America’s largest rail networks, offering transportation services for goods across Canada and the U.S. The railway industry is capital-intensive, but CNR has been excellent at maintaining profitability. Its operating margin of over 40% is a testament to its efficiency. In Q2 2024, CNR reported revenue of $17 billion, showcasing its ability to weather economic cycles. The dividend stock offers a dividend yield of 2.2%, with a longstanding history of increasing payouts. Its strong cash flows and strategic infrastructure investments position CNR well for future growth, making it an excellent addition to a long-term TFSA strategy.
Long-term wins
What ties these stocks together is their impressive earnings strength and consistent dividend history. Hydro One’s operating cash flow for the past 12 months was $2.6 billion. Granite REIT has shown resilience with a payout ratio just below 90%. Plus CNR’s payout ratio of 38.8% indicates it has ample room for future dividend increases. These stocks provide the perfect mix of growth and income, ideal for a TFSA’s tax-free benefits.
Looking ahead, all three companies are poised for future success. Hydro One is investing heavily in modernizing Ontario’s electrical grid, which will pay off in the long run. Granite REIT is positioned to benefit from continued demand in logistics and industrial real estate, especially with global supply chains adapting to e-commerce growth. CNR, meanwhile, remains a vital part of North America’s transportation network and is investing in digital technologies to improve operational efficiency – thusly ensuring its place as a long-term growth leader.
Bottom line
All considered, Hydro One, Granite REIT, and Canadian National Railway are three of the best Canadian dividend stocks to maximize your TFSA’s potential in 2024. Each offers a blend of steady dividends, strong financials, and long-term growth prospects, making them ideal for a tax-free investment. With the tax-free growth that comes with a TFSA, these stocks provide the opportunity to build wealth while enjoying a steady stream of income. Investing your $7,000 contribution in these three stocks is a strategic move to capitalize on Canada’s best sectors of utilities, real estate, and transportation.
