Canadian investors who use a Tax-Free Savings Account (TFSA) have access to one of the best tools available to build wealth. This makes building a smart TFSA portfolio designed for long-term growth and income a goal that is very much possible.
A smart TFSA portfolio works best when it blends income, stability, and long-term growth. To build that portfolio, investors need to pick the right stocks that can provide growth, income, and defensive appeal through market volatility.
Fortunately, the market gives us plenty of great examples, including this trio.
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Pick #1: BMO gives the portfolio a strong financial foundation
The first pick for a smart TFSA portfolio is Bank of Montreal (TSX: BMO). BMO is the oldest of Canada’s big bank stocks. The big banks are almost always near the top of the list of investments to own, and for good reason.
The bank operates across different segments, including personal banking, commercial banking, wealth management, and capital markets. BMO also operates in the U.S. market, where it has a presence in 32 states.
That U.S. presence gives BMO another growth lever beyond the Canadian market.
Turning to income, BMO offers investors one of the longest dividend-paying streaks in Canada. The bank has been paying out dividends for nearly two centuries without fail.
As of the time of writing, BMO offers a quarterly dividend that pays out a 2.9% yield. The bank has also provided annual increases to that dividend going back over a decade.
This combination of stability and dividend reliability makes BMO especially attractive for long-term TFSA compounding.
In short, BMO offers a mix of income, scale and long-term growth potential, which makes it a solid addition for any smart TFSA portfolio.
Pick #2: Canadian Utilities adds defensive dividend stability
The second pick for investors looking to build a smart TFSA portfolio is Canadian Utilities (TSX: CU). Canadian Utilities is one of the larger utility stocks in Canada. The company operates in Canada, the U.S. and the Caribbean.
Canadian Utilities provides investors access to essential infrastructure and regulated utility operations. In a smart TFSA portfolio, this is important because Canadian Utilities generates recurring, stable revenue backed by long-term regulated contracts.
For TFSA investors, that stability can make the ride a little smoother when markets get choppy.
Those contracts allow the company to invest in growth and pay one of the most stable dividends on the market. In fact, Canadian Utilities has the longest dividend streak in Canada of 54 years, making it one of just two Canadian Dividend Kings.
As of the time of writing, Canadian Utilities offers a quarterly dividend that pays out a yield of 3.6%.
Canadian Utilities won’t be the fastest-growing stock in the portfolio. Instead, it will provide a defensive base, steady income, and slow growth.
Pick #3: Canadian Natural Resources brings growth and income potential
The final piece in this smart TFSA portfolio is Canadian Natural Resources (TSX: CNQ), which fills the role of providing growth and cash flow.
Canadian Natural Resources is one of Canada’s most important energy companies. The company offers a large base of low-decline, lower-cost assets.
As an energy producer, Canadian Natural Resources is tied more closely to commodity prices. This means that the company can be more volatile, but it also offers upside when energy markets are strong.
This exposure can enhance long-term TFSA returns when energy cycles strengthen.
Turning to income, Canadian Natural Resources offers a quarterly dividend that pays a yield of 4.3%. The company has also provided annual increases to that dividend for two decades, making it a solid contender for any smart TFSA portfolio.
The right TFSA mix balances risk, income, and growth
No stock is without risk, which is why diversification matters.
Fortunately, the trio of options mentioned above offers diversification across different segments of the market, as well as defensive appeal and growth alongside income-earning potential.
Together, these stocks create a balanced approach that fits well with a smart TFSA portfolio strategy.
In my opinion, one or all of the above would be great additions to any well-diversified smart TFSA portfolio.
