TFSA Investors: 3 Dividend Stocks I’d Buy and Hold Forever

These TSX dividend stocks are likely to help TFSA investors earn steady and growing passive income for decades.

Sneha Nahata

Author Bio

Sneha Nahata has been fascinated by the stock market for as long as she can remember. Growing up in a family of investors and stock brokers, conversations about businesses, markets, and investing were part of everyday life. What started as curiosity soon became a lifelong passion and, ultimately, a career. She began her professional journey at Zacks Investment Research, where she developed her analytical skills and gained experience evaluating investment opportunities. Sneha has been writing for The Motley Fool Canada since 2020, helping investors look beyond the headlines to identify long-term investment opportunities. Her work is also featured on Barchart. Sneha’s investing philosophy combines growth and dividend investing, with a focus on finding businesses that can build wealth over the long term. Outside of finance, Sneha enjoys sketching, exploring new creative ideas, and spending time with her family.

Education

Master of Science (M.Sc.) in Finance

Areas of Expertise

Technology stocks, media and telecommunications, banking and financial services, energy stocks, consumer stocks, dividend investing, growth stocks, fundamental analysis, company valuation, and long-term investing.

Social Media Profiles

Barchart author profile

Favorite Investment Quote

"Know what you own, and know why you own it." — Peter Lynch

Published November 21, 2024 4:50 pm EST

Investing in Canadian dividend stocks through a Tax-Free Savings Account (TFSA) can help you build a steady, tax-free, passive-income stream for decades. This is because dividends, capital gains, or interest are tax-free in a TFSA, thereby enhancing overall returns.

With this background, here are three fundamentally strong dividend stocks worth buying and holding in a TFSA forever. These dividend-paying companies have stable businesses and a growing earnings base, enabling them to consistently reward their shareholders with higher distributions. They also offer attractive yields.

TFSA dividend stock #1

TFSA investors should consider Telus (TSX: T) stock for its durable payouts and high yield. Canada’s leading wireless service provider has consistently rewarded its shareholders with higher dividend payments through its multi-year dividend-growth program. For instance, it has paid about $21 billion in dividends in the past two decades. Moreover, it expects to increase its annual dividend at a high single-digit rate. Further, dividend distributions look sustainable in the long run, with a payout ratio of 60-75% of free cash flow.

The telecom giant’s payouts look secure due to its ability to deliver profitable growth. Its leading network infrastructure, growing customer base, and focus on improving efficiency through cost reduction will continue to support its earnings, enabling it to reward its shareholders with higher dividend payments. In addition, its focus on growing average revenue per user and reducing churn rate will likely support its earnings and drive dividends.

Currently, Telus offers an attractive yield of 7.4%, which is sustainable. Telus is investing in expanding its PureFibre Network and 5G infrastructure and focusing on leveraging artificial intelligence (AI), which bodes well for future growth. Its penetration into high-growth segments such as cybersecurity and digital transformation will further accelerate its growth.

TFSA dividend stock #2

TC Energy (TSX: TRP) is a reliable dividend stock TFSA investors could consider. The energy infrastructure company operates a resilient business led by highly regulated and contracted assets that support its payouts. For instance, TC Energy has consistently increased its dividend since 2000 at a CAGR of 7%. Moreover, it plans to raise its future dividend by 3-5% annually. Currently, TC Energy stock offers a healthy yield of 5.6%.

TC Energy’s long-term contracts and regulated asset base generate predictable earnings and cash flow, positioning it well to consistently pay and increase its dividend in the coming years.

Going ahead, TC Energy will likely benefit from higher system utilization, a multi-billion-dollar secured capital program, momentum in natural gas and power and energy solutions, productivity savings, and a focus on debt reduction. Moreover, it will likely enhance its shareholder value through higher payouts.

TFSA dividend stock #3

Toronto-Dominion Bank (TSX: TD), one of the largest Canadian banks, is another attractive dividend stock to buy and hold forever in a TFSA portfolio. Notably, leading Canadian banking companies have been popular for paying dividends for over a century, and Toronto-Dominion is one among them. It has paid dividends for 167 continuous years.

Moreover, this financial services company has raised its dividend at an average annual growth rate of 10% since 1998, the highest among its peers. It also has a conservative payout ratio of 40-50%, which enables it to pay and increase its dividend. Currently, Toronto-Dominion Bank offers an impressive yield of 5.2%.

Toronto-Dominion Bank’s diversified business model and growing customer base enable it to deliver consistent and predictable earnings growth. Further, its growing loan volumes and deposit margins support its top and bottom lines. In addition, its robust balance sheet, strong credit performance, and focus on increasing efficiency support higher earnings growth and dividend payouts. Furthermore, Toronto-Dominion Bank’s investments in digital capabilities and strategic acquisitions bode well for future growth, positioning it well to enhance shareholder value.