With the Canadian stock market trading near all-time highs, many investors are wondering whether now is still a good time to put fresh money to work. According to World PE Ratio, the Canadian market is trading at roughly a 33% premium to its average valuation over the past five years, making careful stock selection more important than ever.
When building a Tax-Free Savings Account (TFSA) for the long term, I prefer businesses that can consistently grow their dividends through different economic cycles. High-quality dividend growers not only provide rising passive income but also tend to reward patient investors with attractive total returns over time. If purchased at fair or discounted valuations, these are the kinds of Canadian stocks I would feel comfortable buying and holding indefinitely.
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Canadian Natural Resources: A proven dividend compounder
My first choice is Canadian Natural Resources (TSX: CNQ), one of Canada’s leading oil and gas producers. Although commodity prices can fluctuate, the company has built a business that remains highly profitable even during weaker energy markets. With West Texas Intermediate (WTI) oil around US$82 per barrel and the company’s breakeven price in the low-to-mid US$40s, Canadian Natural Resources enjoys a substantial profitability cushion thanks to years of cost reductions and operational improvements.
That financial strength has translated into an outstanding dividend record. The company has increased its dividend for approximately 25 consecutive years, delivering remarkable 20-year dividend growth rate of about 20%, while still achieving roughly 15% annual dividend growth over the past three years.
At a share price of $61.88 at the time of writing, CNQ offers a dividend yield of approximately 4%, comfortably above the broader market’s yield of around 2.1%. Analysts also view the shares as reasonably valued, with potential for more than 13% upside over the near term. For TFSA investors seeking growing income and long-term capital appreciation, CNQ remains a solid choice.
Brookfield Infrastructure: Durable cash flows for decades
Another stock I would happily own forever in a TFSA is Brookfield Infrastructure Partners L.P. (TSX: BIP.UN). The partnership owns and operates a globally diversified portfolio of essential infrastructure assets spanning utilities, transport, midstream energy, and digital infrastructure.
These businesses generate reliable cash flows because they provide services that remain in demand regardless of economic conditions. Even better, long-term trends such as expanding data usage and artificial intelligence (AI) are increasing demand for digital infrastructure, supporting BIP’s objective of generating attractive risk-adjusted returns while growing its annual cash distribution by 5% to 9%.
Since being spun off from its parent company, Brookfield Infrastructure has increased its distribution for approximately 18 consecutive years. Its 15-year distribution growth rate is about 9.5%, while the three-year growth rate remains a healthy 6%. At $55.21 per unit at the time of writing, investors can collect a distribution yield of roughly 4.6%, and analysts generally consider the units fairly valued.
Investor takeaway
Neither stock is immune to market volatility, and pullbacks can create even more attractive buying opportunities. However, both Canadian Natural Resources and Brookfield Infrastructure combine resilient businesses, disciplined management teams, dependable cash flows, and long histories of increasing shareholder payouts. Those qualities make them the types of Canadian stocks I would be most comfortable buying and holding in a TFSA forever, allowing investors to benefit from decades of tax-free dividend growth and long-term wealth creation.
