When building a TFSA focused on income and looking for the best dividend stocks to buy, it can be easy to fall into the trap of trying to find the highest yield possible.
Of course, earning as much income as possible is ideal, but the best investments to hold in your TFSA will almost always offer more than just income today. Because the best stocks to buy are businesses that can continue growing over time, increasing their cash flow and distributions along the way.
That consistent growth is what’s so important. It’s what makes them so powerful in a tax-free account. Because when you combine consistent income with long-term compounding, every dollar you earn and every bit of growth stays in your pocket.
That’s why Brookfield Infrastructure Partners (TSX: BIP.UN) is easily one of the best and most attractive dividend stocks Canadians can own in a TFSA.
It’s a global business with diversified operations, resilient cash flow, and a long history of paying an attractive, growing dividend, all while continuing to increase shareholder value over the long term.
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Why Brookfield Infrastructure is one of the best dividend stocks to buy in a TFSA
One of the biggest reasons Brookfield Infrastructure is such a compelling long-term investment is the type of assets it owns and the resiliency of its operations as a whole.
For example, the company operates a globally diversified portfolio of infrastructure assets, which include businesses such as utilities, pipelines, transportation networks, and data-related assets. These are all essential services that economies rely on every day, regardless of what’s happening in the market.
That’s what helps support stable and predictable cash flow, making it such a reliable dividend stock in the first place. Furthermore, nearly all of its cash flow is backed by long-term contracts or tied to inflation, which adds another layer of reliability.
So even during periods of economic uncertainty, the business continues to generate the income needed to support its distribution.
In addition, though, what really makes Brookfield one of the top dividend stocks to buy in a TFSA is its significant long-term growth potential.
In fact, it’s constantly investing in new projects and expanding its portfolio around the world, while benefiting from trends like increasing energy demand, electrification, population growth, and the continued buildout of digital infrastructure.
Furthermore, Brookfield is consistently recycling capital by selling more mature assets and reinvesting in new opportunities.
That’s important because Brookfield doesn’t just rely on organic growth to fund its consistently growing distribution. It’s also what allows Brookfield to return more cash to investors each year while continuing to expand its portfolio.
So, while it offers an attractive yield right now of roughly 4.6%, more importantly, the fact that it aims to increase that payout by 5% to 9% annually is just as attractive and why it’s one of the best dividend stocks to buy in a TFSA.
Instead of just buying a stock to collect income, you’re owning a business that continues to expand, generate more cash, and increase what it returns to you year after year.
The Foolish takeaway
Although a high-yield dividend stock can be attractive on the surface, the best dividend stocks to buy and hold in your TFSA are actually the businesses with reliable operations that can continue growing for years.
That’s why Brookfield is one of the top picks to consider today, with its combination of reliable cash flow, a strong yield, and consistent long-term growth.
