The Most Comfortable Dividend Stocks to Buy and Hold in a TFSA for Life

Wondering what Canadian dividend stocks provide a mix of defence, growth, and income? These two stocks are perfect for a long-term TFSA.

Robin Brown

Robin Brown has been a Motley Fool contributor since January 2020. He has lived in Canada, Norway, and Australia where he studied theology and business management. Robin works as a commercial real estate manager, as well as an investment research advisor for a private investment manager. Today, he provides equity research and analysis for a private family office. He enjoys traveling, hiking, fishing, and spending time with his wife and children.

Published July 17, 4:10 pm EDT

The TFSA (Tax-Free Savings Account) is the best place to hold investments that can compound considerable value over time. You don’t want to be liable for any tax on a large, outsized capital gain. Likewise, you don’t want to have to pay any tax on the dividend income that you might earn over a lifetime.

That is why the TFSA is the ideal place for your long-term investment holdings. They can just sit there, grow, pay dividends, and multiply your wealth, all while being protected from the Canada Revenue Agency’s greedy hands.

If I was looking for Canadian dividend stocks that I would be comfortable holding for a lifetime, two stocks come quickly to my mind.

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AltaGas: A great TFSA foundation

The first TFSA stock is AltaGas (TSX: ALA). This $17 billion stock is the ideal defensive foundation for any TFSA portfolio.

About 56% of AltaGas’ business comes from its regulated gas distribution utility in the United States. This utility has grown its rate base by an 8% compound annual growth rate (CAGR) in the past five years. It continues to believe that it can sustain that growth rate for the coming five years.

Most utilities are growing in the low-single digits. With AltaGas, investors get above-average growth at a lower-than-average valuation.

The remaining 44% of its business comes from its midstream/export business in Western Canada. Given disruptions in the Middle East, Asian demand for liquified petroleum gas (LPG) is soaring. AltaGas is Canada’s largest LPG exporter. It is enjoying a tailwind of higher volumes and elevated pricing for its exports.

The company is expecting to reach or exceed the high end of its 2026 guidance. This comes as no surprise. AltaGas has a strong record of growth. Its stock is up 110% over the past five years.

This TFSA stock also has a history of raising its dividend by around 6% per year. AltaGas only yields 2.4% today. However, for a mix of capital growth, dividend growth, and very moderate risk, this is one of the best stocks in Canada for a TFSA.

Dollarama: A dream TFSA stock

The second dividend stock I would be happy owning long-term in my TFSA is Dollarama (TSX: DOL). Like AltaGas, Dollarama presents a nice mix of growth, dividend growth, and defensive qualities.

With a market cap of $51.5 billion, Dollarama is one of the largest retailers in Canada. It offers essential daily and seasonal goods, all under $5. The company has been very successful expanding across Canada. It has some of the highest profit margins amongst essential goods retailers in North America.

It is now using that same playbook to grow in Central America and Australia. While Canadian growth may slow to an extent, new geographies are presenting attractive opportunities.

Dollarama has a great record of returns for shareholders. Its stock is up 230% in the past five years and 510% in the past 10 years. It only yields 0.24% now. However, it has raised its dividend for 15 consecutive years. DOL stock’s dividend is up 1,315% over those 15 years.

The Foolish bottom line

Both of these quality stocks could form a good backbone for a long-term TFSA. They may not be the cheapest stocks with the highest yields. However, they have high-quality businesses that you can tuck away for years and even decades ahead.