With another year comes the opportunity to add new cash contributions to the TFSA (Tax-Free Savings Account). For 2025, Canadians can add an additional $7,000 to their TFSA. Depending on how old you are or how long you have been a Canadian resident, you can contribute up to a total of $102,000.
Any additional contribution counts because all earnings made in the TFSA are tax-free. You don’t want to pay any tax on a stock investment that delivers substantial dividend income and capital gains.
If you want income and gains, dividend growth stocks are ideal for a TFSA. If you are looking for some good long-term dividend growth stocks, here are a couple to consider now.
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An insurance stock for compounded dividends
Intact Financial (TSX:IFC) has been an exceptional dividend growth stock. It has increased its dividend for 20 consecutive years, ever since it came to the market in 2004.
In the past 10 years, Intact’s dividend has increased by a 10% compounded annual growth rate (CAGR). The dividend is up 644% since 2004. Its stock has done even better. IFC is up 769% since its IPO.
Intact is an exceptional company. It has made over eight acquisitions that expanded its scale, expertise, and brand across the country. Today, it is the number one property and casualty insurance provider in Canada.
The combination of strong brands, efficient operating model, and tight underwriting have allowed this company to deliver exceptional results. Over the past 10 years, revenues have increased by a 12% CAGR and adjusted earnings per share (EPS) have risen by a 10% CAGR. In that time, return on equity (ROE) has never dropped below 12%.
The future continues to look optimistic for Intact. It recently expanded into the U.K. market after acquiring RSA. Today, it holds 6% market share, but it could easily double that with time. Intact is also growing in the specialty market. If it can hit its goal of $6.4 billion of direct premiums written, there could be attractive upside for the stock.
Intact stock yields 1.8% right now. Certainly, it is not the highest yield. However, if it keeps delivering strong double-digit dividend growth and attractive capital returns, you will be happy you added it to your TFSA.
An energy stock for rising income
Canadian Natural Resources (TSX:CNQ) is another dividend legend worth a long-term hold in a TFSA. Its stock is down 11% since the start of the year and down 24% in the past year. The decline could be a buying opportunity. Canadian Natural stock yields over 6%.
Canadian Natural’s stock is down largely because oil prices have declined 18% this year. Certainly, that is CNQ’s bread and butter. Lower oil prices mean less cash flow.
Yet, there are some reasons to be positive about CNQ. First, it is one of the largest natural gas producers in Canada. Oil is down but natural gas is up. This should help balance out its earnings. Second, the company has an incredible balance sheet. Third, the energy major has a low cost of production. It is generating cash flow, even at US$58 per barrel.
CNQ has increased its annual dividend for 25 consecutive years by a 21% CAGR. It is an incredibly well-managed company. When oil prices recover, this stock could have serious upside.
