The new year is here and brings with it new opportunities. Some of them are the same as every other year, like Tax-Free Savings Account (TFSA) contributions. However, your decisions about these opportunities can change everything.
What you choose to buy with the $7,000 contribution room this year may not seem like a significant enough decision right now, but it can have massive implications for your nest egg in decades to come.
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A safe choice
Fortis (TSX:FTS) is arguably one of the safest Canadian stocks you can put in your TFSA, Registered Retirement Savings Plan (RRSP), or any other account, for that matter. It’s a well-established utility company with a footprint in multiple countries. This presence allows it growth opportunities on multiple fronts.
The company has grown its overall customer numbers at a decent rate from about 3.13 million utility customers in 2014 to 3.5 million in 2023. That’s about 37,000 utility customers annually.
What makes Fortis even safer than a conventional utility company is that the bulk of its assets (99%) and business are regulated, which leads to significant financial stability. One of the reasons Fortis is about to become the second Dividend King in Canada is that it has increased its payouts for 50 consecutive years.
The company also achieved a significant milestone last year — about 33% reduction in its greenhouse gas emissions since 2019 levels. It’s on track to go coal-free by 2032 and net zero in a reasonable time frame. So, unless some aggressive measures and regulations are imposed for this, Fortis may not see any regulatory trouble down the line associated with its carbon footprint.
Return potential
The safety of Fortis comes at a cost. Its returns, especially dividend-based returns, are highly predictable, reliable, and modestly generous. It has a stellar dividend history, and the fact that you can trust it to keep growing its dividends for decades to come makes it a compelling dividend pick.
The 4.1% yield also augments this case, though you can wait for a bear market phase to knock the stock down in 2025 and for the yield to go up to an even more lucrative number.
With $7,000, you can generate a yearly income of $287 with just this year’s contribution. You can use them outside of your TFSA or reinvest them into this or any other company. Its overall return potential (including both dividends and capital appreciation) is modest but highly reliable.
In the last 10 years, the stock has returned about 130% to its investors via dividends and growth, and the chances of the stock returning more in the coming decades are much more significant than the chances of the stock slumping hard (long term) or slashing its dividends.
Foolish takeaway
Fortis is an outstanding stock to park your TFSA contributions for 2025. The stock has a long and consistent history of growing its payouts and capital appreciation in reasonably healthy markets. The last five-year performance of the stock might not be indicative of its long-term growth potential, but it’s there, and it’s worth investing in.
