Investing in dividend stocks can help create a perpetual money machine. Moreover, using a Tax-Free Savings Account (TFSA) to produce a lifetime of income can be a solid strategy, as all dividends and capital gains earned within the account are completely tax-free. That means more money stays in your pocket, and your investment can grow even faster. It’s a simple, tax-efficient way to generate passive income.
However, dividends aren’t guaranteed, and some companies may cut their payouts during tough times. That’s why it’s crucial to focus on high-quality, well-established Canadian companies with strong balance sheets, consistent earnings, and a track record of maintaining or growing their dividends over time. By carefully selecting a few of these reliable dividend payers, your initial $7,000 TFSA contribution can turn into a perpetual money machine.
Against this backdrop, here are the top Canadian stocks with the potential to produce earnings year after year.
Toronto-Dominion Bank stock
Shares of Canada’s leading banks are among the most dependable investments for those looking to start a perpetual income stream. These financial services giants have an impressive track record of paying dividends for over a century, making them a reliable choice for generating passive income for many decades.
Among the top stocks within this sector, TFSA investors can consider investing in TD Bank Group (TSX:TD) or Toronto-Dominion Bank. This financial services company has continuously paid dividends for 168 years. Moreover, it has increased its dividend at a compound annual growth rate (CAGR) of 10% since 1999. Currently, TD Bank pays a quarterly dividend of $1.05 per share, yielding over 4% based on its recent price of $100.69.
TD Bank’s dividend payments are supported by its ability to generate solid earnings and a sustainable payout ratio. Its diversified revenue streams, bolstered by momentum in trading and fee income from market-driven businesses, as well as ongoing deposit and loan growth in Canadian Personal and Commercial Banking, position the bank to deliver consistent revenue and earnings growth.
Additionally, TD’s investments in enhancing the client experience, expanding digital capabilities, and streamlining its operating structure support long-term growth. The bank’s focus on improving operational efficiency and strengthening the balance sheet enhances its earnings growth potential, supporting the sustainability of future dividend payments.
Fortis stock
Fortis (TSX:FTS) is one of the most reliable dividend stocks to buy and hold in a TFSA for steady income. It operates a low-risk, regulated utility business, primarily focused on energy transmission and distribution. These types of operations are less vulnerable to economic fluctuations, allowing Fortis to generate predictable and stable earnings year after year. Furthermore, most of its income is derived from a diversified portfolio of rate-regulated assets, which means it’s shielded, mainly from market volatility.
Due to this dependable earnings base, Fortis has established a solid track record of increasing its dividend for 51 consecutive years. Currently, the stock offers a solid dividend yield of 3.8%.
This blue-chip company has laid out a $26 billion capital investment plan over the next five years, aimed at expanding its infrastructure and supporting the transition to clean energy. These investments are expected to grow Fortis’ rate base by an average of 6.5% annually, setting the stage for continued earnings and dividend growth.
The management projects annual dividend increases of 4–6% through 2029, backed by this expanding rate base and rising energy demand. Furthermore, Fortis is well-positioned to benefit from the growing electricity demand, driven by sectors such as data centres, mining, and manufacturing. These trends create strong long-term tailwinds for the company’s revenue and dividend potential.
Bottom Line
With a proven history of dividend growth, sustainable payouts, and a focus on returning higher cash to their shareholders, TD Bank and Fortis stocks are smart choices for TFSA investors to turn their $7,000 contribution into a perpetual income machine.
