The Ideal Canadian Stocks to Buy and Hold Forever in a TFSA

Here are two picks I would consider as buy-and-hold investments for a TFSA.

Key Points
  • Use the TFSA’s tax‑free compounding to hold long‑term dividend stocks as a buy‑and‑hold strategy for steady income and growth.
  • Balance stability and upside with Fortis (FTS) as a defensive dividend grower (51+ years of hikes, ~3.3% yield) and Nutrien (NTR) for cyclical agricultural exposure (~3.1% yield).
  • 5 stocks our experts like better than [Fortis] >

When it comes to investing for the long haul, financially savvier Canadians often rely on the retirement accounts available to them in the country. In my books, the Tax-Free Savings Account (TFSA) goes beyond being a mere savings account. If you know how to get the best out of it, the TFSA can be a powerful investment tool at your disposal, especially for the long run.

This is why you should ensure that you invest in stocks and allocate at least a sizeable portion of the available TFSA contribution room to hold them. As long-term holdings, I think that dividend stocks can offer the best returns. Besides wealth growth through any long-term capital gains, you can also grow your account balance with dividend income.

Reinvesting dividends to purchase more shares can help you unlock the power of compounding to unlock tax-free wealth growth. Today, I will discuss two picks I would consider as buy-and-hold investments for a TFSA.

Piggy bank and Canadian coins

Source: Getty Images

Fortis

Fortis (TSX: FTS) is one of my top picks whenever I think of dividend stocks, and for good reason. Fortis is a $39.28 billion market-cap Canadian utilities holdings company. Fortis owns and operates several natural gas and electricity utility businesses under its belt. Its primary markets are Canada, the U.S., and the Caribbean. Operating in highly rate-regulated markets and generating predictable cash flows through long-term contracted assets, it is as safe as a dividend stock can get.

Fortis also has a terrific track record of growing shareholder dividends for over 51 years. That is more than half a century of consistently increasing payouts each year. It comes as no surprise that Fortis is a staple in many investor portfolios due to its stellar streak of reliable dividend growth. While Fortis might not offer much in terms of capital gains, its dividend growth more than makes up for it if you are a patient investor.

As of this writing, it trades for $77.42 per share and pays investors $0.64 per share each quarter, translating to a 3.31% dividend yield.

Nutrien

Nutrien (TSX: NTR) doesn’t offer the same dividend-growth history as Fortis, but adds something else to the mix. Nutrien is a $46.63 billion market-cap TSX stock that is a mainstay in the global agriculture industry. The company is a leading provider of crop input and services worldwide. Being the largest producer of potash and one of the world’s major phosphate and nitrogen suppliers puts Nutrien in pole position to continue benefiting from the ever-growing demand for food.

The demand for fertilizers can be cyclical, but the world’s growing population means that the market will only grow. The added bonus is that Nutrien stock pays investors dividends. As of this writing, Nutrien stock pays investors US$0.545 per share each quarter, translating to a 3.10% dividend yield. Between its dividend income and solid prospects for long-term capital gains, it can be an excellent holding for a self-directed TFSA portfolio.

Foolish takeaway

The best TFSA investments are those you can hold for a long time without worrying about returns. That only happens if the underlying business is reliable, has defensive operations, solid long-term demand, and a good track record of paying and growing dividends. To this end, Fortis stock and Nutrien stock offer different qualities that can make them excellent foundational holdings for a TFSA.

Fool contributor Adam Othman has no position in any of the stocks mentioned. The Motley Fool recommends Fortis and Nutrien. The Motley Fool has a disclosure policy.

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