Market turbulence has investors wondering where they can get good returns on their Tax-Free Savings Account (TFSA) contribution without taking on too much risk.
In the current environment, it makes sense to look for companies that have long track records of delivering dividend growth through difficult economic conditions. These stocks are not immune to market corrections, but they tend to bounce back to new highs on the rebounds.
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Fortis
Fortis (TSX: FTS) is a good example of a stock that should be good to own through a recession. The board has increased the dividend in each of the past 51 years. A quick look at the long-term stock chart suggests that buying Fortis on a dip can turn out to be a savvy investment.
Fortis owns utility businesses in Canada, the United States, and the Caribbean. These assets, which include natural gas distribution utilities, power-generation facilities, and electricity transmission networks, generate rate-regulated revenue that is normally predictable and reliable. Households and businesses need power and natural gas regardless of the state of the economy.
Fortis is working on a $26 billion capital program that will increase the rate base by a compound annual growth rate of 6.5% through 2029. The resulting jump in cash flow should support planned annual dividend growth of 4% to 6%. Acquisitions or new capital projects could increase the size of the dividend hikes or extend the guidance.
At the time of writing, Fortis provides a dividend yield of 3.7%.
Royal Bank of Canada
Royal Bank (TSX: RY) is Canada’s largest financial institution, with a current market capitalization of $227 billion. The stock is down about 7% in 2025, giving investors who missed the big rally last year a chance to buy RY stock on a dip.
Royal Bank is in a good position to battle for the roughly two million Canadian homeowners who are facing mortgage renewals in 2025 and 2026. The bank has a strong capital position and can afford to be picky with the type of clients it wants to add to its portfolio. Royal Bank is benefitting from its $13.5 billion takeover of HSBC Canada last year. The deal added more than 100 branches across the country, serving 780,000 customers, and expanded Royal Bank’s international reach, making it more attractive for businesses with international banking needs. The acquisition also added a portfolio of affluent clients.
Royal Bank delivered strong fiscal 2024 results in a year that proved to be challenging for some of its peers. Adjusted net income came in at $17.4 billion, up 10% from fiscal 2023. Adjusted return on equity (ROE) remained high at 15.5%. Royal Bank finished fiscal 2024 with a common equity tier-one ratio of 13.2%. This is comfortably above regulatory requirements and means the bank has ample cash on hand to fund growth initiatives or ride out market turbulence.
Royal Bank trades near $160 per share at the time of writing, compared to the 12-month high of around $180. Investors who buy the pullback can get a dividend yield of 3.7%.
The bottom line on top TSX stocks for a TFSA
Near-term volatility is expected in the broader market, and these stocks could see a new downside. However, Fortis and Royal Bank should be solid picks at their current levels for buy-and-hold TFSA investors seeking reliable dividends and a shot at decent long-term total returns.
