Stock market volatility is something every investor faces at any given time, due to circumstances beyond their control. Whether the volatility happens due to rising inflation rates, changing interest rates (or even news related to it), global conflicts, or the fears of a slowing economy, market volatility can seem intimidating. For seasoned investors, these periods are an opportunity to think about long-term investment decisions.
There is no way to tell when and how market volatility starts, or how long it can last. However, stock market investors can control the type of businesses and industries they invest in for their self-directed Tax-Free Savings Account (TFSA) portfolios.
One of the best ways to build a TFSA with a long-term perspective is to focus on companies with defensive businesses, reliable cash flows, and solid fundamentals that can sustain the return of capital to shareholders for decades.
These are the types of companies that investors focus on when markets become more volatile because the underlying businesses have the flexibility to invest in growth, maintain payouts, and execute long-term strategies despite short-term challenges. Today, I will discuss two TSX stocks that can help you retire richer if you buy and hold in a TFSA for decades.
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BCE
BCE Inc. (TSX: BCE) is a $27.7 billion market-cap giant in the Canadian telecom sector. It is one of the Big Three Telcos in Canada, enjoying a wide share of the market, operating through subsidiaries that serve millions of Canadians daily, creating highly predictable and recurring revenue for the company. Regardless of the state of the economy, customers pay for internet and other communications services, giving BCE stock valuable defensive qualities.
Predictable revenue translates into strong cash flow for the underlying business, enabling the stock to continue its network expansion while returning significant capital to investors through quarterly dividends. As of this writing, BCE stock trades for $29.69 per share and pays investors $0.44 per share each quarter, translating to a 5.9% annualized dividend yield that you can lock into your self-directed TFSA today.
Freehold Royalties
Freehold Royalties Ltd. (TSX: FRU) is a $2.6 billion market-cap stock in the oil and gas industry. Energy stocks can often be some of the most volatile investments to hold in the stock market, but FRU stock provides an atypical asset for stock market investors interested in the industry. The stock offers exposure to the energy industry, but with a relatively lower degree of risk to investor capital.
FRU is not in the business of investing billions in drilling wells and production operations. Instead, the company owns royalty interests on land producing energy commodities. Freehold lets other companies develop those properties and handle the operating costs that come with it. In return, Freehold generates revenue through royalties, generating significant free cash flow without many of the risks involved in the industry.
It is an attractive business model that lets FRU stock pay its investors $0.09 per share each month, translating to a juicy 6.8% dividend yield that you can lock into a self-directed TFSA portfolio.
Foolish takeaway
No matter how defensive it is, no stock is completely immune to the impact of market downturns. However, resilient businesses tend to hold up better than the more speculative names in the market when the economic environment is harsh. Therefore, if you are looking for reliable long-term holdings for a TFSA, BCE stock and FRU stock can be some of the best investments to consider.
