When it comes to growing a Tax-Free Savings Account (TFSA) with steady income, few options are as reliable as dividend stocks. Canadian Dividend Aristocrats offer the potential for predictable income and long-term growth, making them ideal for Canadian investors seeking to build reliable passive-income streams and grow wealth over time. Canadian Natural Resources (TSX: CNQ) stock, CT Real Estate Investment Trust (TSX: CRT.UN), and Canadian Utilities (TSX: CU) stock are three strong dividend payers that offer stability, growth, and attractive yields — up to 6.1% — which are ideal for fortifying any TFSA portfolio.
Let’s see why.
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CT REIT: Yielding 6.1%
For income-seeking TFSA investors, CT REIT provides a blend of stability and growth potential in Canada’s retail real estate sector. As the primary landlord for Canadian Tire (TSXCTC), CT REIT owns a portfolio of 370 retail properties covering over 30 million square feet across the country. This real estate investment trust (REIT) offers a low-risk profile with a well-occupied portfolio and a committed occupancy rate of 99.4%, underscoring its ability to generate stable rental income.
During the first nine months of 2024, CT REIT achieved notable growth in key metrics, including a 5% year-over-year increase in rental revenue, a 3.3% increase in adjusted funds from operations (AFFO), and a 4.5% bump in net operating income (NOI). Its portfolio is performing well, and growing alongside Canadian Tire’s new location rollouts.
Income investors love that CT REIT has raised its annual distributions 11 times since going public in 2013, signaling a strong commitment to its dividend-focused investors. With a current payout ratio of about 73.1% of AFFO, CT REIT’s distribution is well covered and yields a hefty 6.1% annually — a figure expected to increase steadily with future “traditional” annual raises. The trust could form part of a core holding in an income-oriented TFSA.
Canadian Natural Resources stock: Yielding 4.7%
Canadian Natural Resources (CNQ) has long been a favourite among dividend investors, thanks to its resilient oil and gas production assets and track record of increasing quarterly payouts for 25 consecutive years now.
As one of Canada’s leading energy companies, CNQ boasts an extensive low-cost, low decline asset base that can sustain production for more than three decades at a break-even price in the low US$40s per barrel of West Texas Intermediate (WTI) oil.
In a bold move to expand production, CNQ raised dividends by 7% in October. It’s acquiring Chevron’s Canadian assets for US$6.5 billion, adding 122,500 barrels of oil equivalent per day to its capacity. This acquisition may increase free cash flow, allowing for future dividend raises and share repurchases. The CNQ dividend should yield approximately 4.7% in 2025.
Despite the usual volatility in energy prices, CNQ’s low-cost operations and prudent financial management have consistently enabled it to grow dividends. With a current price-to-earnings (P/E) ratio of 13.7 — competitive in the energy sector — CNQ remains an attractive choice for TFSA investors looking for dividend growth in a sector known for its cyclical nature.
Canadian Utilities stock: Yielding 5.1%
Utilities stocks like Canadian Utilities (CU) can be invaluable during times of elevated economic uncertainty, as they generate predictable and dependable, regulated cash flows. CU is a leader in the utilities sector and boasts a remarkable 52-year dividend-growth streak, securing its place as one of the two Canadian Dividend Kings. Its consistent dividend growth comes from a portfolio of essential assets that provide electricity and natural gas services across North America and Australia.
At a 5.1% annual yield, CU stock’s dividend adds a solid income stream to any TFSA. With an average payout ratio of 78% of free cash flow over the last 12 months, CU stock’s dividend appears secure, backed by predictable revenues and cost recovery models that protect against inflationary pressures. Furthermore, CU is well-positioned to benefit as interest rates fall to reduce the burden of interest costs on its debt that enhances distributable cash flow.
For TFSA investors seeking steady long term income streams, Canadian Utilities stock is a solid pick.
Investor takeaway
A well-constructed TFSA portfolio filled with rock-solid dividend-payers like CT REIT, CNQ stock, and CU stock may provide investors with tax-free passive income, growth potential, and some downside protection. That said, more investment opportunities are available to help diversify and grow your TFSA.
