The Tax-Free Savings Account (TFSA) is the ideal place for Canadian investors to compound their investments. When you don’t pay any tax on your investment income (whether it be capital gains or dividends), you can accelerate the wealth accumulation process.
You can save as much as 10–20% of your investment income by just investing inside a TFSA. If you are looking for an attractive mix of dividend income and capital upside, here are three Canadian stocks to hold today.
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A top Canadian insurance stock
Intact Financial (TSX: IFC) is a dividend all-star that should be considered for any TFSA portfolio. IFC stock has increased its dividend for 20 consecutive years. Over the past 10 years, its dividend per share has risen by a 10% compounded annual growth rate (CAGR).
Intact stock has done nicely as well. It is up 225% in the past 10 years. Fundamental performance is aligned with the stock. Revenues have increased by a near 11% CAGR and earnings per share have risen by an 8% CAGR.
Intact has used its dominant market position in Canada to provide attractive value for consumers. As it scales, it can offer more insurance products at different affordability ranges.
The company is using the same strategy to become a significant insurance player in the U.K. It is also expanding its exposure to the speciality insurance market.
Despite its strong performance to date, Intact stock should perform resiliently for TFSA shareholders going forward. IFC yields 1.9% today.
A utility stock for a TFSA
AltaGas (TSX: ALA) looks like another attractive dividend stock for a TFSA. It has recently delivered very solid returns for shareholders. Its stock is up 167% in the past five years. AltaGas has been in turnaround mode for the past few years.
Today, that turnaround is largely complete, and its financial results reflect it. Over the past three years, AltaGas has grown revenues by a 5.6% CAGR. Earnings per share are up by a 33% CAGR. AltaGas has sold off non-core operations and significantly reduced its debt levels.
Today, AltaGas operates four high quality regulated utilities in the U.S. The leading North American infrastructure company has been working to steadily grow its rate base and invest in high return-on-equity infrastructure opportunities. It also has a Canadian midstream operation that should benefit from rising exports of natural gas products to Asia.
AltaGas has increased its dividend per share by a 6% CAGR over the past three years. It expects to keep doing so for the immediate future. This TFSA dividend stock yields 3.3% today.
A long-term retail stock to hold in a TFSA
Another TFSA stock for dividends and capital appreciation is Alimentation Couche-Tard (TSX: ATD). While recent returns have been somewhat lacklustre, its stock is still up 89% in the past five years and 167% in the past 10 years.
Alimentation operates a global convenience and gas station empire. The retailer has strategically acquired smaller players around the world. It uses its strong brands, attractive offerings, and economies of scale to improve margins and grow sales organically.
While results have weakened due to a more challenging macro environment, the company continues to push initiatives that will provide longer-term growth.
Couche-Tard is also eyeing an acquisition of 7-11. While that is questionable, it could make it the largest convenience retailer in the world. Regardless, Couche-Tard is a very well-managed business with a good long-term record. It also has a great dividend growth rate. ATD stock currently yields 1.1%.
