TFSA Investors: 3 Dividend Stocks Worth Buying While They're Down

TFSA Investors: 3 Dividend Stocks Worth Buying While They’re Down

These three stocks are the perfect trio for investors looking for long-term growth at one heck of a deal.

Amy Legate-Wolfe

Author Bio 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. Her work can also be found at Canada's National Observer, where she writes on the business side of climate action. Before joining Motley Fool Canada, Amy 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. Social Media 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 December 9, 2024 4:00 pm EST

Investing in dividend stocks within a Tax-Free Savings Account (TFSA) offers a powerful way for Canadians to grow their wealth. With a TFSA, dividends earned are completely tax-free, and withdrawals do not count as taxable income, making it a top choice for those aiming to build a steady income stream while avoiding the tax burden. When selecting dividend stocks for a TFSA, a combination of stability, growth potential, and a solid history of shareholder returns is key. Let’s explore how OpenText (TSX: OTEX), goeasy (TSX: GSY), and BCE (TSX: BCE) fit this bill perfectly.

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OpenText

OpenText is a global leader in information management and cloud-based services, catering to businesses seeking to harness the power of data and artificial intelligence (AI). Recently, OpenText announced its fiscal year 2024 results, reporting total revenues of $5.8 billion — a 29% year-over-year growth.

Despite some challenges in revenue growth last quarter, the company’s quarterly earnings showed a 4.3% increase compared to the same period last year, signalling its resilience. OpenText also introduced a $300 million share-buyback program and raised its annual dividend by 5%, reflecting its commitment to rewarding shareholders. With a forward price-to-earnings (P/E) ratio of 8.55, it remains attractively valued, especially for investors looking to combine stable dividend income with long-term growth in the tech sector.

goeasy

Next, goeasy may be a lesser-known gem, yet it has steadily built a reputation in the financial services sector by catering to non-prime borrowers. Over the years, it has shown phenomenal growth, with its loan portfolio increasing by 30% year over year in its latest quarter to reach $3.65 billion.

The company’s ability to expand during uncertain economic times is a testament to its solid business model and management. Goeasy also boasts a growing dividend, with a forward annual yield of 2.75% backed by a payout ratio of just 27%. This leaves ample room for future increases, making it an appealing choice for those looking to boost their TFSA’s income potential. Moreover, with a robust forward P/E of 8.40, goeasy offers a balance of value and growth for savvy investors.

BCE

Finally, BCE is one of Canada’s most recognized telecommunications companies, continuing to be a pillar of stability and reliable income. Although facing pressures from a highly competitive industry, BCE’s scale and diversified services allow it to weather challenges effectively.

The company’s latest moves, including its acquisition of Ziply Fiber for $5 billion and the sale of its stake in Maple Leaf Sports & Entertainment for $4.7 billion, highlight its strategic focus on streamlining operations and enhancing its market position. While quarterly revenue dipped slightly by 1.8% year over year, BCE’s forward annual dividend yield of over 10% is hard to ignore. With its reliable cash flow and strong commitment to returning value to shareholders, BCE stands out as a core holding for any TFSA focused on income generation.

The perfect trio

Together, OTEX, GSY, and BCE bring a mix of growth potential, robust financials, and generous dividends to the table. For a TFSA investor, these qualities are invaluable. OpenText’s focus on AI and cloud solutions positions it well in a world increasingly reliant on digital transformation. Meanwhile, goeasy’s unique positioning in the lending space taps into an underserved market, driving robust growth that supports its rising dividend. Lastly, BCE remains a beacon of stability, particularly for income-seeking investors who value consistent cash flow, even amid market volatility.

Another significant advantage of these companies is resilience during economic uncertainty. Dividend stocks, especially those with a history of increases like OTEX and GSY, often demonstrate stability during market downturns. This makes them a practical choice for risk-averse investors looking to safeguard their savings while still growing their wealth.

Bottom line

Incorporating OTEX, GSY, and BCE into your TFSA is not just about diversifying. It’s about building a portfolio that works for you in multiple ways. Whether it’s OpenText’s growth in AI and cloud technology, goeasy’s remarkable earnings trajectory, or BCE’s steady dividend yield, these stocks align perfectly with the goals of a TFSA investor. If you’re looking to make your investments work smarter, not harder, these three options could be the winning formula for a thriving, tax-efficient portfolio.