TFSAs are among the best investment vehicles available to Canadians looking to invest in a dividend stock or two for their retirement. These special accounts, which are designed for growth, allow for invested funds to compound tax-free.
The secret to that compounding lies with picking the right dividend stock and setting up dividend reinvestments. This allows every dollar of income to compound tax-free. Over the course of a decade or more, that becomes a powerful force for a portfolio.
The best investments for that task are long-term dividend payers that can provide steady, predictable income while also catering to growth. TFSA investors looking for dependable, long‑term income often turn to stable dividend stocks.
Let’s take a look at the one dividend stock that every TFSA investor needs to be aware of, Fortis (TSX:FTS).
Source: Getty Images
Fortis: A classic TFSA‑friendly dividend stock
Fortis is one of the most reliable dividend stocks in Canada. The reason for that stems back to its lucrative yet simple business model. As a regulated utility, Fortis earns predictable revenue from electricity and natural gas distribution.
Fortis isn’t just stable. The company is also huge. It’s one of the largest utility stocks in North America, with operations in Canada, the U.S. and the Caribbean.
The services that Fortis provides are considered essential and come with a fixed demand that doesn’t fluctuate with the economy, nor are they prone to volatility like other market segments. That stability translates into consistent earnings that leave room for both growth and an impressive quarterly dividend.
That dividend stands out for more than its yield. Fortis has provided investors with annual upticks to that dividend for over 50 consecutive years without fail. That’s a rare track record, giving a nod to both Fortis’ stable business model and its disciplined management.
More importantly, that incredible amount of time makes Fortis one of only two Dividend Kings in Canada. For income investors looking for the right dividend stock in a TFSA, it elevates Fortis to the top of a shortlist.
For those TFSA investors, Fortis’ mix of low-volatility, defensive appeal, and reliable dividend growth makes it a perfect fit for any portfolio. And the company’s long-term capital plan, which includes a multi-billion-dollar allocation over the next several years, will continue to boost earnings and that dividend.
What kind of dividend income can Fortis deliver?
Fortis offers investors a quarterly dividend that carries a yield of 3.2%. The company’s half-century streak of increases is slated to continue, with guidance calling for increases of 4–6% through the end of the decade.
And thanks to Fortis’ defensive business stemming from regulated long-term contracts, that predictable revenue stream translates into sustainable payout ratios.
That consistency is valuable for TFSA investors who want predictable, rising income without taking on unnecessary risk.
When inside a TFSA, dividends become even more powerful. Every dollar of income stays in the account, untouched by taxes, and can be reinvested to buy more shares. Over time, this creates a compounding loop that steadily increases both income and total value.
What $21,000 in Fortis could look like over time
With $21,000 invested in Fortis, investors can expect to generate an income of just over $675 in the first year. Those dividends can generate an additional 8 shares from reinvestments alone.
Over the years and decades, this compounding effect becomes substantial, especially when sheltered inside a TFSA.
Because Fortis is built for stability rather than rapid growth, it’s well‑suited for investors who want a low‑maintenance, long‑term holding. The company’s ongoing capital investments support future earnings growth, which can translate into continued dividend increases. For TFSA investors, this means rising income over time.
In short, investors with $21,000 sitting idle in a TFSA should consider Fortis as part of any income-producing portfolio.
Buy it, hold it, and watch your future income grow.
