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.
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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.
