A TFSA Income Stock Yielding 3.4% With Very Consistent Cash Flow

Nutrien (TSX:NTR) stands out as a great value pick in a Canadian market that’s getting stretched.

Key Points
  • Put TFSA money to work in stocks rather than idle cash—unless you’ll need it in 12–18 months, prefer low‑effort market exposure (e.g., S&P 500 ETFs) or dividend payers to beat inflation.
  • Nutrien (TSX:NTR) is a good TFSA pick: ~3.4% yield and ~13.5× trailing P/E with a low‑cost fertilizer + retail mix and long‑term crop‑demand tailwinds, though commodity volatility remains a risk.

When it comes to your TFSA (Tax-Free Savings Account), you should aim to invest in stocks, rather than letting sums sit in cash. That is, of course, unless you expect to use the proceeds to finance a major purchase in the near future (let’s say the next 12 to 18 months). In my view, the biggest problem with many Canadians’ TFSAs is that cash is just left alone, piling up in savings accounts and losing purchasing power from inflation (it’s running hot again, by the way) every single year.

Indeed, it’s tempting to just put off getting started investing with one’s TFSA funds. After all, the first win is contributing in the first place. In any case, I’d argue that investing an amount, even in something as simple as an S&P 500, could be a wise move that requires little additional effort on the part of an investor.

For long-term thinkers, it’s more about those low-effort moves that can help make a huge impact over time which are the biggest of wins.

concept of growth

Source: Getty Images

TFSA as an income generator?

Whether you’re looking to compound and grow or get a nice quarterly paycheque that’s free from tax, the TFSA is a smart tool that you should actually put to work for you. While I’m an advocate for setting a TFSA with stocks meant to be held for years at a time, I’m not against investing in dividend stocks with yields on the higher end. At the end of the day, added flexibility is never a bad thing as you think about what you could do with the cash balances that have built up over the quarters.

You can either reinvest it (recommended) or draw it down and spend it. As long as you keep tabs on the TFSA moves so that you can recontribute amounts in future years, there’s nothing wrong with taking on an income approach, especially when it comes to the fatter yielders that might have driven up your tax bill if held within non-registered accounts.

Nutrien

In this piece, we’ll have a closer look at Nutrien (TSX: NTR), a dividend payer and grower that’s often overlooked in favour of higher-yielders or larger market cap firms with more in the way of positive upside momentum (think the Canadian banks).

Yes, Nutrien’s payout isn’t the largest you can get, currently sitting at just shy of 3.4%. And, sure, the chart may have made some just a bit woozy in the past year, as shares tumbled close to 25% from peak to trough while some of the other high-yielders have gone up smoothly (again, the Canadian banks).

Still, if you want to stretch your dollar, shares of Nutrien are hard to beat, especially as they continue to regain the ground lost since that $114 and change peak hit back in March. At 13.5 times trailing price-to-earnings (P/E), you’re not just getting another commodity producer; you’re getting one of the best-in-class low-cost fertilizer producers out there.

Of course, even strong operating economics can’t reduce the impact of commodity price fluctuations. But, at the end of the day, I do think Nutrien’s strong miner business and its retail presence, which helps steady the ship, make for a perfect mix for value seekers who also want dividend growth on the cheap.

Finally, there’s the secular tailwind that is the demand for higher crop yields to feed a growing global population to think about.

Fool contributor Joey Frenette has no position in any of the stocks mentioned. The Motley Fool recommends Nutrien. The Motley Fool has a disclosure policy.

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