The Tax-Free Savings Account (TFSA) is one of the best wealth-building tools available to Canadians. Part of the reason for that is that dividends, capital gains, and reinvested distributions can compound tax-free inside the account. This makes it a powerful tool for investors, provided they select the best Canadian stocks to buy and hold.
Fortunately, there’s no shortage of great options on the market. This includes some of the best Canadian stocks to buy and hold. Here are three picks that can offer investors a combination of stable earnings, strong growth potential and reliable, recurring dividends.
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Bank on this stock for scale and income
It would be hard to mention some of the best Canadian stocks to buy and hold and not include one of Canada’s big bank stocks. Toronto-Dominion Bank (TSX: TD) is the second-largest of the big banks and offers a compelling case for investors.
TD offers a retail banking presence in both Canada and the U.S. In fact, Canadian investors may be shocked to realize that TD has more branches in the U.S. than it has in Canada. That U.S. network comprises TD’s main growth focus, with a network stretching from Maine to Florida.
TD also offers growing commercial banking and wealth management segments. This gives the bank a diversified approach that caters to both growth and defensive investors.
Turning to income, TD has paid a quarterly dividend for well over a century. As of the time of writing, that dividend carries a yield of 2.8%. Further to this, TD has provided investors with annual upticks to that dividend for over a decade.
That fact alone makes TD one of the best Canadian stocks to buy and hold.
All aboard Canada’s compounding engine
Are you invested in railways? Despite the stereotype that railways are remnants of the last century, rail traffic still accounts for most of North American freight. This makes them incredibly defensive holdings, often viewed as arteries of the North American economy.
And that’s just part of the appeal of Canadian National Railway (TSX: CNR). The railway operates a massive network stretching from coast-to-coast and down through the U.S. Midwest to the Gulf region. This gives the railway access to three coastlines and a direct connection to major metro markets across the continent.
Canadian National hauls over $250 billion of goods across its network each year. This easily makes it one of the backbone businesses of the economy and one of the best Canadian stocks to buy and hold.
Turning to income, Canadian National’s 2.2% yield isn’t the highest, but it’s stable and growing. In fact, Canadian National has amassed three decades of consecutive annual dividend increases.
Add some defensive appeal
Rounding out the three best Canadian stocks to buy and hold is Fortis (TSX: FTS).
Fortis is one of the largest utility stocks on the market, with operations in Canada, the U.S., and the Caribbean. The company’s electricity and gas operations provide essential services to millions of customers in those markets.
The sheer necessity of the services provided makes Fortis one of the most defensive companies on the market. Those services are also backed by long-term regulated contracts that span decades.
The result is that Fortis generates a reliable and recurring revenue stream that leaves room for the company to invest in growth and pay a handsome quarterly dividend.
As of the time of writing, Fortis’ dividend carries a yield of 3.3%. Fortis has also provided annual upticks to that dividend for 53 consecutive years, making it one of just two Dividend Kings in Canada.
Are these the best Canadian stocks to buy and hold?
No stock is without risk, and that includes the trio of options mentioned above. Fortunately, in this case, the three stocks all serve different segments of the market and offer defensive appeal to complement that compounding potential.
In my opinion, one or more should be core holdings in any well-diversified portfolio.
