The Tax-Free Savings Account (TFSA) is one of the most powerful tools available to Canadian investors. With the right dividend stocks, investors can build a stream of tax-free income that can last a lifetime.
Here’s a look at a trio of picks for TFSA investors to buy now.
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Defensive anchor – Fortis
Utility stocks like Fortis (TSX: FTS) are some of the best long-term options for investors. That’s because utilities generate a reliable and recurring revenue stream. That revenue stream is backed by long-term regulated contracts, which often span decades. It also allows the utility to invest in growth and pay out a great dividend.
Fortis is one of the largest utility stocks in North America. The company has operating regions in the U.S., Canada, and the Caribbean. Those assets are regulated, which means stable and recurring revenue streams.
TFSA investors considering Fortis will not be disappointed. The company offers a respectable quarterly dividend that works out to a yield of 3.5%.
Fortis has provided investors with annual increases to that dividend going back over 50 consecutive years without fail. This makes Fortis one of just two Dividend Kings in Canada and one of the best defensive anchors for TFSA investors.
Growth and income hybrid – TD Bank
It would be hard to mention great stocks for TFSA investors without mentioning one of Canada’s big banks. One standout pick is Toronto-Dominion Bank (TSX: TD).
TD is the second largest of the big bank stocks with a strong presence in both Canada and the US. The bank’s US presence represents its primary growth focus, which contributes a growing portion of TD’s revenue.
That segment, which now has more branches than its Canadian counterpart, was built out in the years following the Great Recession. Today, the US network stretches from Maine to Florida along the East Coast.
While the US segment provides growth, the domestic segment provides stable revenue generation, which allows the bank to invest in further growth initiatives while continuing to pay out a handsome dividend.
As of the time of writing, that dividend works out to a yield of 3.7%. TD Bank has paid out dividends for well over a century without fail. That speaks to TD’s stability and defensive appeal. Adding to this is dividend growth.
TD has provided investors with annual upticks to that dividend going back well over a decade. The bank also plans to continue that cadence while investing in growth.
High-income generator: Canadian Apartment Properties
TFSA investors seeking a high-income generator should consider investing in a REIT. And while there are many different options to consider on the market, the one for TFSA investors to look at right now is Canadian Apartment Properties REIT (TSX: CAR.UN).
Canadian Apartment Properties is the largest residential REIT in Canada, boasting a massive portfolio of apartments and townhomes across the country. Those units provide a steady rental income and exposure to real estate for investors without the hassle of direct ownership.
This is a huge advantage that is often disregarded by investors. That’s because rising interest rates and increasing home values have priced out many, if not all, would-be landlords from the market.
And unlike owning a single rental property, investing in a REIT like Canadian Apartment Properties spreads risk out over hundreds of different units across the country in multiple markets.
Prospective investors don’t need to worry about mortgages, maintenance payments, tenants, or any other issue.
The one area where investors in a REIT share the same experience as landlords is when it comes to monthly income. Canadian Apartment Properties REIT pays out a generous monthly distribution.
As of the time of writing, that monthly payout works out to a yield of 4.5% making it a solid option for any TFSA investor.
Build a great portfolio for TFSA investors
There’s no shortage of great stocks on the market, and leveraging the tax benefits of a TFSA can boost your portfolio over the long term, given the right investments.
Fortunately, the trio of options mentioned above can provide defensive appeal, growth, and income-producing generation that will last decades.
In short, one or all these stocks should be core positions in any well-diversified portfolio.
