A Perfect TFSA Stock: A 6.2% Yield With Constant Paycheques

KP Tissue stock offers a 6.2% dividend yield with monthly payouts and improving margins. Here’s why it belongs in your TFSA right now.

| More on:
Key Points
  • KP Tissue delivered Q1 2026 adjusted EBITDA of $86.9 million, up 14.6% year over year, on revenue of $544.6 million.
  • The company pays a reliable monthly dividend, giving TFSA investors a steady stream of tax-free income.
  • A new converting line in Memphis and a planned through-air drying facility in the Western United States signal serious long-term growth.

If you want a reliable monthly paycheque from your Tax-Free Savings Account (TFSA) and you are not holding KP Tissue (TSX: KPT), you are likely leaving money on the table.

KP Tissue offers a dividend yield of approximately 6.2%, paid every quarter. For income investors, it is one of the most practical, no-nonsense ways to put your tax-free room to work. And the business backing those payouts is stronger than most people realize.

We think KP Tissue is a buy for long-term TFSA investors who want reliable income, modest growth, and a business that sells something Canadians cannot stop buying, regardless of what the economy is doing.

happy woman throws cash

Source: Getty Images

KP Tissue is a top dividend stock

KP Tissue holds a 12% interest in Kruger Products, which is Canada’s top tissue products company by both dollar and volume market share. Its brands include Cashmere, Purex, Scotties, SpongeTowels, and Bonterra, among others.

Tissue products are household staples with inelastic demand, making KP Tissue a recession-resistant stock. That defensive quality is exactly what makes KP Tissue a fit for a TFSA, as you are betting on a business that grinds out cash flow across market cycles.

In Q1 2026, the company generated adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $86.9 million, an increase of 14.6% year over year. Its EBITDA margin grew to 16% in Q1 from 13.9% in the year-ago period.

KPT reported revenue of $544.6 million, which was flat year over year. A strong Canadian dollar weighed on U.S. dollar sales, which masked solid volume performance. On the balance sheet, cash grew to $205.9 million. The leverage ratio fell to 2.9 times from 3.1 times over the last three months.

CEO Dino Bianco credited lower pulp prices and reduced warehousing costs for the profitability gains. Both the Consumer and Away-From-Home segments contributed positively in the quarter.

Capacity growth adds a real upside catalyst

Here is what separates this Canadian dividend stock from a simple income play. The company is actively investing in capacity, which creates room for revenue and earnings growth over the next few years.

In early April 2026, Kruger Products launched a new state-of-the-art converting line at its Memphis facility. That line will bolster output in the premium bathroom tissue and paper towel categories, supporting the U.S. business as it scales.

Notably, Kruger Products is finalizing plans for a brand-new through-air drying (TAD) tissue plant in the Western United States. The facility will have an annual production capacity of roughly 75,000 metric tons and is expected to begin production by the end of 2028. The product is aimed squarely at the ultra-premium segment, which is growing faster than the broader tissue category.

Bianco confirmed on the earnings call that the company expects to make an official announcement on the TAD project before the end of the second quarter of 2026.

Is the TSX dividend stock undervalued?

Management guided Q2 adjusted EBITDA to come in around the same range as Q1. That suggests roughly $87 million in the next quarter, which keeps the dividend well supported.

Input cost pressure is the main risk to watch.

  • Pulp prices are expected to trend higher through 2026, particularly for bleached eucalyptus kraft (BEK) pulp.
  • Fuel and freight costs are also rising.
  • Management said it would raise prices if needed, but that no increases have been announced yet.

For now, the yield, improving margins, and growth pipeline add up to a compelling picture.

Fool contributor Aditya Raghunath has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

More on Dividend Stocks

doctor uses telehealth
Dividend Stocks

Vital Infrastructure Is a Savvy TFSA Stock Paying 7% and the Price is Right

Vital Infrastructure Property is a defensive TFSA stock that gives investors high-yield income and predictable returns.

Read more »

ETFs can contain investments such as stocks
Dividend Stocks

No Time for Stock Research? This 1 ETF Does the Work for You

The iShares S&P/TSX Capped Composite Index Fund (TSX:XIC) eliminates the need for stock picking.

Read more »

woman holding steering wheel is nervous about the future
Dividend Stocks

Does Retirement Feel Far Away? These TSX Dividend Stocks Can Speed Things Up

These stocks have made some long-term investors quite rich.

Read more »

TFSA (Tax free savings account) acronym on wooden cubes on the background of stacks of coins
Dividend Stocks

How Much You Really Need in a TFSA to Make $500 a Month

It takes quite a bit of money to get $500 per month in a TFSA if you invest in index…

Read more »

up arrow on wooden blocks
Dividend Stocks

2 Great Canadian Dividend Stocks That Just Raised Their Payouts Again

These companies have delivered annual dividend growth for decades.

Read more »

a man relaxes with his feet on a pile of books
Dividend Stocks

TFSA Passive Income: 3 Incredible Stocks That Earn $2,148/Year

These Canadian stocks have a solid history of dividend distribution and are likely to sustain their payouts in the years…

Read more »

Offshore wind turbine farm at sunset
Dividend Stocks

While Interest Rates Sit Still, These 2 Dividend Giants Look Good

Looking for more income? Check out these two high-income stocks!

Read more »

The sun sets behind a power source
Dividend Stocks

Why This Canadian Utility Stock Could Be the Best Stock You Never Think About

This mini-Fortis (FTS) stock is a high-yield Canadian utility stock hidden in plain sight

Read more »