Canadians’ ability to take advantage of tax-free savings accounts (TFSAs) is something that shouldn’t be overlooked. Similar to the Roth IRA, the TFSA allows investors to put after-tax capital to work in this long-term savings account for retirement. And when one retires, all the growth that accumulated over years (and hopefully decades) can be withdrawn tax-free.
That means that companies with sky-high growth rates tend to be best positioned to be included in such retirement savings vehicles. For Canadian investors looking to put some capital to work in this account, focusing on the highest-growth stocks in the market is typically the way to go. Dividend stocks, on the other hand, may be better suited for other retirement accounts such as the RRSP.
With that said, there are a few dividend-paying growth stocks I think could fit in a TFSA. Here’s one of my top picks in the Canadian market and why.
Alimentation Couche-Tard
Not necessarily known as a dividend stock, Alimentation Couche-Tard (TSX:ATD) actually does pay a dividend yield.
Currently distributing $0.195 per quarter (amounting to a dividend yield around 1.1% at the time of writing), Couche-Tard’s growth prospects are complemented by some rather solid distributions that have grown over time.
And while Couche-Tard’s management team has mulled pulling this dividend in the past (in part to fund future acquisitions, and keep that growth capital in-house), long-term investors who have stuck with Couche-Tard have seen their returns bolstered by such a yield. That’s a part of the entire investing thesis around Couche-Tard which I think is under-appreciated.
Investors are still in this name for growth
That said, I’d still argue that this convenience store and gas station conglomerate is still widely viewed as a growth-by-acquisition opportunity, not a dividend play. That’s not something that’s going to change anytime soon.
In consolidating a very fragmented sector, with the majority of gas stations and convenience stores still small mom-and-pop operations (either one-offs or small chains), there’s plenty of room for long-term growth to continue. And while the chart above shows a story of a company that seems to have slowing growth (and deal growth has indeed slowed), I do think a re-acceleration on this front, particularly at better prices (if we do see a downturn), could provide even better returns for those thinking long term.
Thus, I think ATD stock is looking like a strong buy here. This is a stock I will continue to focus on as a big picture TFSA opportunity, until that thesis is broken.
