Adding dividend stocks to a Tax-Free Savings Account (TFSA) can enhance your investment returns by maximizing tax efficiency, generating income, and supporting long-term wealth accumulation. Moreover, all capital gains, dividends, and interest earned within the account are tax-free. This makes TFSAs ideal for long-term investments, where you can reinvest dividends and compound your returns over time.
With this background, here are four dividend stocks to buy and hold forever to maximize your TFSA’s potential.
Source: Getty Images
Dividend stock #1
TC Energy (TSX:TRP) is one of the most reliable Canadian dividend stocks to buy and hold forever in a TFSA. The energy infrastructure company operates an extensive network of natural gas pipelines, linking low-cost supply regions to high-demand markets. With a low-risk, highly contracted business model, TC Energy generates stable earnings and has increased its dividend for 25 consecutive years. Moreover, it offers a high yield of over 5%.
Furthermore, with 97% of its adjusted earnings before interest, taxes, depreciation, and amortization coming from its rate-regulated assets or long-term take-or-pay contracts, TC Energy’s dividend is expected to grow at a rate of 3-5% annually.
The Southeast Gateway pipeline is now in service, adding substantial contracted cash flow to its portfolio. Rising LNG exports, growing power generation, particularly from coal-to-gas conversions, and increased energy demand from data centres are expected to further strengthen TC Energy’s financial performance. The company also maintains a strong project pipeline, with several initiatives in late development stages. These projects, focused on high-return opportunities, will support continued earnings growth and reliable dividend payouts.
Dividend stock #2
Enbridge (TSX:ENB) is another top dividend stock to buy and hold in a TFSA, offering a high yield, stable payouts, and a strong track record of dividend growth. With a diversified business model, long-term contracts, and low-risk commercial arrangements, it consistently generates strong distributable cash flow (DCF) to support its dividend. Notably, Enbridge has grown its dividend at a compound annual growth rate (CAGR) of 9% for 30 years and currently offers a yield of about 6.2%.
Its extensive pipeline network ensures high utilization, linking key supply and demand regions. Meanwhile, rising demand for natural gas, driven by data centres and industrial growth, will support its transmission business. Meanwhile, its gas distribution and storage business continues expanding with customer growth, and Enbridge’s growing renewable energy footprint further strengthens its cash flow.
Given the resilience of its business and growing DCF, Enbridge projects a mid-single-digit dividend growth in the long run.
Dividend stock #3
Fortis (TSX:FTS) is a no-brainer stock to increase your TFSA’s income potential. The Canadian utility giant benefits from its regulated operations, which offer stability, predictability, and protection from market volatility. Moreover, its focus on energy transmission and distribution assets adds another layer of stability to its earnings, supporting dividend growth.
Fortis has an impressive track record, increasing its dividend for 51 consecutive years. Right now, it offers a solid 3.8% yield.
Looking ahead, Fortis plans to invest billions in infrastructure projects, aiming to grow its rate base by 6.5% annually through 2029. That growth will support its plan to raise dividends by 4% to 6% annually. Furthermore, Fortis is well-positioned to benefit from the shift toward cleaner energy and rising electricity demand.
Dividend stock #4
TFSA investors seeking long-term passive income could add Scotiabank (TSX:BNS), one of Canada’s top banks, to their portfolios. Known for paying dividends since 1833, Scotiabank is a reliable income stock. Moreover, it has increased its dividend by an average of 5% annually since 2014.
The bank’s focus on high-growth markets, expanding loan and deposit portfolios, and diversified revenue streams will drive future earnings and dividend payments. Moreover, with solid asset quality and operational efficiency, Scotiabank remains profitable and poised to increase its quarterly payouts.
Currently, Scotiabank pays a quarterly dividend of $1.10 per share, offering an annual yield of 5.9%, making it a compelling stock to maximize your portfolio’s income potential.
