Worry-Free TFSA: 3 Dividend Stocks for Consistent Tax-Free Compounding

Dividend stocks can be some of the best options for long-term growth, especially in a TFSA.

Amy Legate-Wolfe

Amy became interested in investing in 2018 after having her first daughter. After receiving a masters degree in journalism from Western University, she became frustrated that the finance industry remained a confusing place for Canadians like her: new parents, millennials, and other young people who needed to understand their finances. Now, Amy focuses on tech companies and renewable energy for growth opportunities, coupling that with long-term investing strategies and equities. She also provides investors with a daily newsletter, Canada Stock Digest, for daily market updates. Before joining Motley Fool Canada, she wrote for major news organizations including HuffPost, CTVNews.ca, and CBC. When she’s not researching investing strategies, Amy’s time is pretty much monopolized by her two wild daughters, but in what little spare time she has she loves to do yoga, go on walks with her dog, and travel with her husband. Follow Amy on LinkedIn and Canada Stock Digest. Favorite Investment Quote: “October: This is one of the particularly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February.” – Mark Twain

Published April 29, 2025 9:45 pm EDT

Creating a worry-free Tax-Free Savings Account (TFSA) that grows steadily over time starts with picking the right dividend stocks. The goal is simple. Find reliable companies that pay strong dividends, grow those payouts, and give your portfolio a boost year after year, without losing sleep. Right now, three Canadian dividend stocks fit that bill perfectly. Those are Sun Life Financial (TSX: SLF), Canadian Utilities (TSX: CU), and TELUS (TSX: T). These are the kinds of dividend stocks you can buy, tuck away, and let compound inside your TFSA.

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Sun Life

Sun Life has been a household name in Canada for well over a century. It is not just an insurance company anymore. Sun Life has grown into a global financial services firm offering wealth management, health benefits, and investment services – all to millions of clients across North America, Asia, and Europe.

As of December 31, 2024, Sun Life had a whopping $1.5 trillion in assets under management. That gives it enormous clout in the global financial world and a strong base for continued profitability. While the first quarter 2025 earnings are due out on May 8, Sun Life’s past results show steady strength. The dividend stock has a habit of delivering consistent earnings, maintaining a healthy balance sheet, and raising its dividend over time. That makes it a powerful addition to any TFSA. Plus, with so much diversification across business lines and countries, Sun Life gives you built-in exposure to growth markets while paying you a solid dividend yield today.

Canadian Utilities

Canadian Utilities is the ultimate definition of steady. This dividend stock operates electricity and natural gas distribution businesses across Alberta, Australia, and other parts of the world. What makes Canadian Utilities such a standout for TFSA investors is its track record. It holds the crown as the Canadian company with the longest streak of annual dividend increases, more than 50 consecutive years.

As of January 9, 2025, Canadian Utilities declared a quarterly dividend of $0.4577 cents per share, or about $1.83 annually. That gives investors a very attractive and dependable income stream. Financial results for the first quarter of 2025 will be released May 7, but if history is any guide, Canadian Utilities will continue to show the kind of slow-and-steady performance that is perfect for tax-free compounding. With a conservative balance sheet, a regulated business model, and ongoing investments in energy infrastructure, Canadian Utilities offers both safety and moderate growth.

TELUS

Then there’s TELUS, one of Canada’s leading telecom giants. In a country where owning and operating telecom networks requires deep pockets and lots of regulatory knowledge, TELUS carved out a strong position. Its fourth-quarter 2024 results showed 3.5% growth in revenues, climbing to $5.4 billion. It is not just about wireless plans and internet packages, either. The dividend stock has been growing aggressively into digital health services, agriculture technology, and customer service solutions through its TELUS International division. This opens up new streams of revenue beyond the traditional telecom business.

TELUS recently declared a quarterly dividend of $0.4023 per share. This reflects the dividend stock’s ongoing commitment to returning cash to shareholders. The dividend yield on TELUS is typically higher than average, making it an appealing stock for TFSA investors looking to reinvest those payments and watch the snowball effect in action. TELUS also tends to raise its dividend twice a year, a habit that has delighted investors for over a decade.

Bottom line

By spreading a TFSA across these three dividend stocks, investors can enjoy regular, growing income streams while minimizing stress about short-term market swings. Dividends will be paid directly into the TFSA, compounding without the drag of taxes, and over time, even small amounts reinvested can make a huge difference. It is the kind of strategy that rewards patience and lets your money quietly work for you in the background. If you are looking to set up a worry-free, tax-free portfolio this year, Sun Life, Canadian Utilities, and Telus are a smart place to start.