Take Full Advantage of Your TFSA With These 5 Dividend Stars

Choosing the right dividend stars for your TFSA can be tricky, especially if your goal is to maximize the balance of income and sustainability.

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The Tax-Free Savings Account (TFSA) can be a great place to stash the right dividend stocks and start a reliable, tax-free passive income.

A bank stock

Toronto-Dominion (TSX:TD) has the distinction of being the second-largest Canadian bank by market cap and the top Canadian bank in a number of avenues. It has a massive local and U.S. presence and strong fundamentals.

Created with Highcharts 11.4.3Toronto-Dominion Bank PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.ca

Its performance has historically been comparable to that of the largest bank in Canada, but the last couple of years haven’t been good for this stock. Since hitting its peak in 2022, the stock has steadily gone down, and it’s currently trading at a 27% discount.

This slump stands out more because other major banks are presently strongly bullish. However, one significant benefit of this slump is that the yield has been pushed to an attractive level (5.3%).

An energy stock

Enbridge (TSX:ENB) is one of the most confident dividend picks, not just from the energy sector but also from the TSX as a whole. It has a stable business model thanks to midstream (pipeline services) and natural gas utility, both of which promise relatively stable revenues. Then there is its stellar dividend history: 29 consecutive years of growth.

Created with Highcharts 11.4.3Enbridge PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.ca

A good time to buy this stock would have been early 2024, when the yield was much higher than it is now. But at 6% yield, it’s still one of the most generous Dividend Aristocrats currently trading on the TSX right now.

A financial stock

While banks are among the most coveted dividend picks in the financial sector, First National Financial (TSX:FN) is another stock worth considering. It’s one of the largest mortgage companies in Canada that aren’t banking institutions and has a diversified portfolio of mortgages totalling $143.5 billion.

Created with Highcharts 11.4.3First National Financial PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.ca

From a performance perspective, the stock has been modest at best, but it’s a robust dividend stock. It has grown its payouts for 11 consecutive years and is now offering a juicy 6.3% yield, backed by a payout ratio of 81.2.

A utility stock

If you are looking for a solid combination of safety and decent yield, Canadian Utilities (TSX:CU) is an easy choice. It’s the oldest Dividend Aristocrat in Canada and has climbed to the rank of Canada’s first Dividend King after growing its payouts for 50 consecutive years. The utility business itself provides a significant layer of safety for its dividends.

Created with Highcharts 11.4.3Canadian Utilities PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.ca

Thanks to the 17% discount the stock trades at, the yield has increased, but not by a massive margin. Still, the 5.3% yield it offers is quite decent for a dividend stock of its pedigree. It’s also modestly valued, and you may benefit from some growth as well if it makes a recovery.

A REIT

CT REIT (TSX:CRT.UN) is one of the few REITs that have risen to the rank of aristocrats because, despite being generous with their yield, many REITs tend to be slightly inconsistent with their payouts. CT REIT is different, not just because of its history but also because of its symbiotic relationship with Canadian Tire, its most significant client.

Created with Highcharts 11.4.3Ct Real Estate Investment Trust PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.ca

Along with this business model safety and ten consecutive years of dividend growth comes the generous 6.4% yield. It also pays monthly dividends, making it great for passive income from a frequency perspective.

Foolish takeaway

The five blue-chip stocks will be perfect in your TFSA if your goal is to start a healthy and reliable passive income. Some of these are also well-positioned for modest, long-term growth or at least stability, so your capital would be safe as well.

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This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Adam Othman has no position in any of the stocks mentioned. The Motley Fool recommends Enbridge. The Motley Fool has a disclosure policy.

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