Durability is one of the Tax-Free Savings Account’s (TFSA) best characteristics. Tax-free income could be perpetual because users can set aside money and contribute throughout their lifetime. If you plan to do the same, match with buy-and-hold stocks like the National Bank of Canada (TSX:NA) and Fortis (TSX:FTS).
Both companies are solid “holds” for long-term TFSA investors. Because of solid fundamentals and impressive dividend track records, the two dividend stocks can help create enormous wealth. Retirees, in particular, can contribute to their TFSAs and amass shares of NA and FTS as long as they can for uninterrupted quarterly income streams.
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Enhanced earnings power
Six lenders form the nucleus of Canada’s banking system. The Big Bank stocks, from the largest to the smallest, are rock-solid investments. However, if you’re investing today, seriously consider the National Bank. The growth potential of this $46.2 billion financial institution is crystal clear.
On February 3, 2025, it completed the acquisition of a top regional bank, Canadian Western Bank. Integration activities and onboarding of CWB employees and clients have begun. “Our combined organization will provide customers with an expanded product and service offering nationally while maintaining regional expertise,” said Laurent Ferreira, President and CEO of National Bank.
In Q1fiscal 2025, net income rose 8% to $997 million versus Q1 fiscal 2024, aided by the revenue growth of all business segments. According to Ferreira, the first quarter results reflect solid execution and diversified earnings power. “In a context of heightened macroeconomic and geopolitical uncertainty and an evolving credit cycle, we remain committed to maintaining our usual discipline regarding credit, capital and costs,” he added.
TFSA investors should be OK with the decent but safe dividend offer (40.5% payout ratio). At $117.89 per share, the yield is 3.9%. Market analysts covering the stock have a 12-month average price target of $133.86, 14%-plus potential upside.
Tried-and-true defensive holding
Fortis wears a crown and is loved by income-focused investors. The $32.3 billion regulated electric and gas utility company is one of only two TSX dividend kings. Last month, its dividend increase (4%) was the 51st consecutive year of dividend hikes. At $64.63 per share, the yield is 3.8%. Earnings-wise, net income in 2024 increased 6.6% year-over-year to $1.6 billion.
Its President and CEO, David Hutchens, said, “We remain focused on extending our track record as we execute our $26 billion five-year capital plan in support of our annual dividend growth guidance of 4% to 6% through 2029.” Management expects to enhance shareholder value through the execution of its capital plan. The cash from operations and regulated utility debt will fund it.
After 2029, Fortis plans to pursue opportunities to extend growth and further expansion, especially the electric transmission grid in the U.S. to support load growth and facilitate the interconnection of cleaner energy. Notably, TFSA investors will have a tried-and-true defensive holding. The incredible dividend growth streak is proof.
Quality investments
TFSA investors with long-term views should stay the course and remain in the market even if volatility is elevated as it is today. The National Bank of Canada and Fortis are quality companies that have endured countless economic downturns.
