I’d argue that a Tax-Free Savings Account (TFSA) is perhaps best utilized for top growth stocks or growth-linked index funds.
That said, some investors do have a solid rationale for holding dividend stocks within their TFSA — particularly companies that have shown the ability to raise their dividends consistently over time. For those investors willing to reinvest these dividends back into these stocks via a dividend-reinvestment program (DRIP), such a strategy can yield impressive capital gains over the long term.
For those who find themselves in this boat, here are two top TSX dividend stocks I’d recommend investors consider to generate meaningful passive income in retirement.
Source: Getty Images
Dream Industrial REIT
Dream Industrial REIT (TSX: DIR.UN) continues to be one of my top real estate-related dividend stocks right now.
My underlying thesis for Dream Industrial is really pretty simple. The company’s portfolio of high-quality industrial real estate (mainly warehouses and distribution centers) located in close proximity to city centres bodes well for investors who are looking to capitalize on key trends such as cap rate compression among such assets. The thesis is that less and less such real estate will exist over time, as rezoning laws shift toward providing more residential development in such areas. As such, the existing stock that’s in play today is really what we have to work with.
With Dream Industrial’s portfolio of industrial real estate assets secured by long-term deals with blue-chip tenants, there’s a lot to like about this company’s cash flow growth profile over time. And with diluted funds from operations rising 4.3% year over year (fueled by learning growth and an addition of 2.7 million square feet within the company’s portfolio), I think there’s more upside to be had.
Providing a dividend yield of 5.6% which can be reinvested in this stock over time, Dream Industrial remains one of my top picks for investors looking to put capital to work in their TFSA, Registered Retirement Savings Plan, or brokerage account right now.
Suncor
Shifting gears to the energy sector, Suncor (TSX: SU) is another top dividend gem I think long-term investors would be remiss to ignore right here.
The company’s stock chart above is really a thing of beauty. Indeed, investors who put capital to work in this stock prior to the pandemic will remember how painful it was to own Suncor during that period of time.
Fast forward a few years to a period of time in which energy prices appear to have broadly stabilized, and it’s apples and oranges. Suncor’s stock chart now looks like the sort of steady up-and-to-the-right chart other consistent dividend stocks provide.
With a current dividend yield of 3.8% and plenty of production growth set to hit in the coming quarters, this is a low-cost producer that should reap the benefits of the overall energy independence narrative that’s been building in the markets in recent years.
With a more welcoming Canadian and American administration toward energy, I think Suncor is poised to outperform in the years to come. This is a stock I think can provide double-digit total returns over the long haul, which can be supercharged by a DRIP over time. What’s not to like?
