Market volatility is something every investor will have to deal with at some point. Whether it’s driven by inflation concerns, changing interest rate expectations, geopolitical events, or fears of a slowing economy, periods of volatility for Canadian stocks in your TFSA are simply part of long-term investing.
The good news is that while investors can’t control when volatility will strike or how volatile things will get, they can control the types of businesses they own.
That’s why one of the best ways to build a TFSA for the long haul is by focusing on companies with defensive business models, reliable cash flow, and management teams that consistently return capital to shareholders.
These types of businesses are often ideal because they have the financial flexibility to continue investing in growth, maintaining their dividends, and executing their long-term strategies regardless of what’s happening in the broader economy.
They’re also the types of companies that investors often gravitate toward when markets become more volatile.
So, while no stock is completely immune to market sell-offs, businesses with stable earnings and dependable cash flow often hold up better than more speculative names.
Therefore, if you’re looking for reliable Canadian stocks you can own in your TFSA through just about any market environment, here are two of the best on the TSX.
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A stable business built on recurring cash flow
Telecommunications may not be the most exciting industry, but that’s exactly what makes BCE (TSX: BCE) one of the most reliable Canadian stocks TFSA investors can own.
The company provides services that millions of Canadians rely on every day, creating recurring and highly predictable revenue.
That means that no matter if the economy is booming or slowing, customers continue paying for internet, wireless, and other communication services, which is why it’s such a reliable long-term investment.
And because that predictable revenue also leads to strong cash flow, it allows the Canadian stock to continue investing in its network while returning a significant amount of capital to TFSA investors through its dividend. Furthermore, with the stock still trading well off its all-time high, BCE currently offers an attractive yield of 5.7%.
And now, after last year’s dividend reset, the payout is much better aligned with the company’s cash generation, making it more sustainable over the long term and one of the best businesses Canadians can own as a core TFSA stock.
A top dividend stock in the energy sector to hold in your TFSA
Energy stocks can often be some of the most volatile investments in the market, but Freehold Royalties (TSX: FRU) offers investors a much lower-risk way to gain exposure to the sector, which is why it’s a Canadian stock worth considering as a long-term cornerstone in your TFSA.
Rather than spending billions of dollars drilling wells and operating production assets itself, Freehold owns royalty interests on energy-producing land.
As companies develop those properties, Freehold collects royalty income without having to fund the drilling or many of the ongoing operating costs.
That makes its business model significantly lower risk, less capital-intensive, and ultimately less volatile than many traditional energy producers.
As a result, Freehold is able to generate significant free cash flow while avoiding many of the risks that come with directly operating production assets.
And because its royalty portfolio is diversified across both Canada and the United States, the company not only reduces company-specific risk but also benefits from long-term growth opportunities on both sides of the border.
So, while commodity prices will always influence the business to some extent, the royalty model provides a more resilient way to gain energy exposure while still allowing investors to benefit from long-term drilling activity.
In fact, Freehold’s dividend, which currently yields a whopping 6.7%, is sustainable even if WTI oil prices fall to around US$50 per barrel, a level they haven’t traded at in over a decade.
So, if you’re looking for reliable Canadian stocks to buy and hold in your TFSA through virtually any market environment, Freehold and its lower-risk business model make it one of the top energy stocks to consider.
