It’s rare that an opportunity arises to invest in a business that has monopoly status. This is what you are getting by investing in Hydro One Ltd. (TSX:H). Investors looking for a stock to hold in their TFSA that provides dividend growth, security, and long-term gains need look no further than Hydro One

Hydro One is the largest electricity transmission and distribution company in Ontario. The company controls roughly 25% of electricity distribution and holds 96% of transmission assets in Ontario. The fact that Hydro One owns nearly all of the transmission assets in Ontario provides it with a near-monopolistic advantage.

Two dominating business segments

Let’s look at Hydro One’s two business segments: transmission and distribution.

Hydro One’s transmission assets engulf Ontario. The company has committed over $1.5 billion through 2022 to improve, maintain, and acquire the remaining transmission infrastructure in Ontario. Although these figures are impressive, I don’t see anything monumental occurring in this segment. Hydro One has a mere 4% of transmission infrastructure to obtain, after which it will literally own all transmission assets in Ontario.

The distribution side of Hydro One is where major growth opportunities exist. As mentioned above, Hydro One currently has a 25% market share of all electricity distribution in Ontario. Although this is impressive and dwarfs the nearest competitors’ market share, it leaves plenty of room for growth and consolidation.

Currently, in Ontario there are 72 local distribution companies (LDCs). Hydro One has been consolidating LDCs for quite some time and will continue to do so in the future. The number of LDCs currently in Ontario, as well as Hydro One’s sheer size and power, will provide the company with further growth opportunities going forward.

As Hydro One obtains more distribution companies, look for its market share, revenue, and dividend to grow.

Could the government throw a wrench into earnings?

Although the government has promised lower electricity rates and rebates, Hydro One isn’t as affected as stakeholders may think.

Firstly, the government’s rebate does not come out of Hydro One’s earnings, but rather the government’s portion of sales tax on customers’ bills. This means Hydro One’s earnings won’t be affected at all by the government’s rebate.

Secondly, it should be acknowledged that there is growing pressure and discontent for current electricity rates. Although the discontent is real, Hydro One’s current customers really don’t have anywhere else to go. Unless the government monumentally changes rates, Hydro One should be just fine.

Why Hydro One is better than a GIC in your TFSA

Essentially, all interest payments, capital gains, and dividend payments are tax-exempt once held inside a TFSA. So, what’s the difference between a safe GIC and Hydro One?

The key difference between a GIC and holding Hydro One in a TFSA is that you will be making exponentially more money from Hydro One’s dividend payments. Yes, a GIC is guaranteed by the Government of Canada and thus is less risky than any stock on the market, but keep in mind Hydro One’s business model. Hydro One operates like a monopoly and has regulated earnings. Although investors are taking on a bit more risk than a GIC, Hydro One is definitely a better play for long-term investors.

Hydro One’s current dividend yield is a respectable 3.87%, and it has been forecasted that dividend growth will be 6.5% through 2021. The current dividend yield, along with continued dividend growth will provide investors with a solid, predictable return for years to come.

Should you hold Hydro One in your TFSA?

Hydro One Ltd. offers a great dividend yield, has predictable income, is looking to grow through acquisitions, and has business segments that are synonymous with a monopoly. This is a company that I feel very comfortable recommending as a part of any investors long-term holdings in their TFSA.

Do your research, have fun, and be Foolish.

The post This Stock Will Electrify Your TFSA appeared first on The Motley Fool Canada.

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The following three Canadian companies offer fantastic dividend returns. Own these stocks, and you can sit back, relax, and collect your dividend payments.

One hot and fresh investment opportunity

Pizza Pizza Royalty Corp. (TSX:PZA) is arguably the most iconic  pizza chain in Canada. Pizza Pizza currently has over 750 locations across Canada, including its Pizza 73 subsidiary, which operates in western Canada. Pizza Pizza’s branding, positioning, and healthy returns all point to a company that is poised for continued success

The best part about holding Pizza Pizza as an investment is that the company pays a monthly dividend amounting to a 4.88% annual return. Not only does it make great pizza, but the yield is fantastic! Consider the fact that a savings account at any major bank in Canada currently pays about .05-0.5% in annual interest.

Although Pizza Pizza has locations throughout Canada, the company is mainly concentrated in Ontario. This presents massive growth opportunities for Pizza Pizza to expand.

Not only does Pizza Pizza have opportunities for growth geographically, but the company continually grows and differentiates the menu. Healthy eating is not a fad; it’s here to stay. With this in mind, Pizza Pizza has wisely added many health-conscious ingredients and options to its menu. This highlights that management is on track with what customers are demanding, and that management will continually adapt the Pizza Pizza menu to varying tastes and lifestyles.

Pizza Pizza’s stock price has been on the rise for the past five years, and for good reason. Growth potential, a fantastic dividend, and a management team that adapts to consumer tastes are all reasons to own this stock.

Twenty-two years of continued growth is all you need to know

Let’s start off with the simple fact that Enbridge Inc. (TSX:ENB)(NYSE:ENB) not only pays a dividend of 4.76%, but it has increased the dividend for 22 years in a row! That is an amazing accomplishment considering the turmoil that financial markets have gone through in the last two decades.

Enbridge has increased the dividend at an average compound annual growth rate of roughly 11%. To top things off, Enbridge anticipates an average dividend-growth rate for the coming eight years of 10-12%.

Enbridge has $74 billion worth of combined current and future projects in the pipeline thanks in part to the merger with Spectra Energy Corp. This merger has placed Enbridge as the largest pipeline company in North America ranked by market value. By securing a steady stream of major projects, Enbridge has essentially locked in continued growth.

To summarize, Enbridge controls natural gas pipelines, oil pipelines, and is heavily investing in sustainable energy projects for the future. Enbridge’s current dividend of 4.76% is very generous. If you are looking for a company that is going to continually pay out strong dividends, Enbridge is the company to invest in.

This is one company you can bank on

Toronto-Dominion Bank (TSX:TD)(NYSE:TD)  is one of the behemoths known in Canada as the Big Five banks. TD has earned a remarkable reputation for itself as a company that grows dividends, continually increases revenue, and holds a prominent position on social media.

TD currently pays a dividend with a 3.66% annual return. TD also has the highest five-year dividend-growth rate of any of the Big Five banks. At 10.8%, TD dwarfs all of the Big Five banks in Canada with respect to dividend growth and is showing no signs of slowing down

Social media is, and will continue to be the future of communication. TD’s presence on social media is impressive. TD is by far the most active of the Big Five banks on social media. The bank currently has 102,000 followers on Twitter and has posted the most tweets, at roughly 71,000, of any bank in Canada.

These numbers are relevant  because more people are banking using their phones, and a growing number of youth are becoming involved in their own banking affairs. Students in Canadian elementary and high schools are being exposed to financial literacy more now than ever before and are taking more of an interest in their own finances. This young demographic represents a potentially massive amount of future revenue for TD.

If there is one Canadian bank to recommend based off dividend performance and growth, it is TD.

Should you own all three of these stocks?

Pizza Pizza Corp., Enbridge Inc., and Toronto-Dominion Bank all offer fantastic returns on their dividends and have each continually increased their dividend payments. Do your research and strongly consider owning any or all of these great Canadian dividend stocks.

The post 3 Great Canadian Dividend Stocks appeared first on The Motley Fool Canada.

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Two giants among heavyweights

Toronto Dominion Bank (TSX:TD)(NYSE:TD), and Royal Bank of Canada (TSX:RY)(NYSE:RY) are the two banks that rise to the top among the Big Five banks in Canada. There is certainly an argument to be made that any of the major banks in Canada could prove to be solid long-term investments, providing both capital gains and solid dividend growth, but both TD and Royal have clear characteristics that make them more promising investments.

Not only do both banks hold the most assets (only two banks to have assets in the trillions), but they both have impressive growth rates and great dividend track records.

Impressive growth rates

TD and Royal have continually enjoyed solid revenue growth and income growth that outpaces the other large banks in Canada. Over the past three years, TD and Royal have had income growth of 10.5%, and 8.1%, respectively. Although some of the other big banks are in similar realms, TD and Royal consistently post the highest numbers with regards to revenue growth.

Let this fact sink in.

When looking at revenue growth and net income growth over a three-year, five-year, and 10-year period, both TD and Royal have the highest numbers in all of those time frames. This is important, because higher revenue growth generally means banks are attracting more customers, acting on new opportunities, and expanding their boundaries.

The other significant detail within these financials is that they are over both a short and long period of time, showing that both banks have been doing a great job of growing their revenues and bottom lines for significant periods of time.

Solid dividend yields

While slightly below both Bank of Nova Scotia  (TSX:BNS)(NYSE:BNS) and Bank of Montreal (TSX:BMO(NYSE:BMO), which both have dividend yields of approximately 3.8%, both TD and Royal retain very respectable yields of roughly 3.5%. More importantly, TD and Royal have the highest five-year dividend-growth rates at 10.8% and 8.8%, respectively. This shows that both TD and Royal not only consistently pay out healthy dividends, but that they are also both increasing their dividends at the highest rate among big banks in Canada.

The one bank I have not mentioned yet with regards to dividend yield is Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM). CIBC currently has a dividend yield around 4.67%. Wow; that’s significantly higher than either TD or Royal! Why shouldn’t this be the stock to choose then?

Well, CIBC also has the lowest one-year return of the five banks, the lowest revenue growth over the past three-, five-, and 10-year time frames, and the lowest total assets of any of the banks. So, although CIBC has a higher current yield, I would eliminate this bank based on the other financials just mentioned. CIBC has not been able to show that it can grow its revenues or dividend at the same pace as either TD or Royal.

Which company should you bank on?

At the end of the day, all of the major Canadian banks are fairly solid investments. However, if you are to choose one or two elite banks among the five major companies, I would suggest investing in TD and/or Royal. Any investor looking at solid blue-chip stocks knows that dividend growth as well as having the ability to steadily increase revenue growth are paramount characteristics.

Both TD and Royal grow their revenue and net income at higher levels than the other banks, and both have the highest dividend-growth rates among the major banks. It’s safe to say that you can bank on these two companies to provide you with a healthy long-term return.

The post Which of the Big 5 Canadian Banks Should You Own? appeared first on The Motley Fool Canada.

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The power of branding

When you think of the athletic equipment and apparel market, chances are the first company that comes to mind is Nike Inc. (NYSE:NKE). This is no accident or coincidence!  Nike has spent billions of dollars maintaining and strengthening its brand image. The company does this through endorsements, cleverly placed sponsorship deals, and by acquiring or partnering with other strong brands, such as Apple Inc. with Apple Watch Nike+.

Canopy takes a page from Nike

Canopy Growth Corp. (TSX:WEED) seems to have looked to Nike for inspiration on how to create a powerful brand. Canopy has arguably spent more time and money than any other Canadian LP trying to create a strong brand.

When compared to other LPs, such as Aphria Inc. or Organigram Holdings Inc., Canopy has acquired significantly more notable brands to add for its portfolio and overall brand image. Canopy is essentially doing what Nike has successfully done for years, by partnering with other strong brands(Leafs by Snoop) and buying existing brands, such as Mettrum.

This aggressive branding strategy has put Canopy in a great position going forward and has enabled the company to claim the largest customer base of all Canadian LPs.

Closer look at Leafs by Snoop

Canopy partnered with Snoop Dogg last year in an agreement that will allow Canopy to sell three varieties of Leafs by Snoop as well as the ability to have exclusive use of some of the company’s brands and content.

The whole idea of this partnership, from Canopy’s point of view, is that it is aligning its brand with Snoop’s. Canopy is creating an emotional tie with Leafs by Snoop and, in turn, an emotional relationship with Snoop’s fan base, which currently sits at roughly 17 million based on Twitter.

Snoop Dogg is arguably one of the most culturally significant pop figures that exists when talking about marijuana. To have the ability to partner with a brand that has the cultural power that Leafs by Snoop has, not to mention the Twitter following, is a big advantage to Canopy’s overall brand image.

What if only plain packaging is allowed?

Much talk has occurred regarding the topic of plain packaging, or a total lack of ability for LPs to brand and market their products. Many of the top LPs have already begun lobbying the government to allow some sort of marketing/branding on packaging. If the government, in fact, does allow LPs to visually market their various products on packaging, I would argue that Canopy is, by far, positioned the best.

If the government chooses a model in which only plain packaging is allowed, then Canopy may have wasted a lot of time and money trying to create a culturally relevant brand image. Imagine sports shoes that can’t be placed in bright, flashy, attractive packages, that can’t be endorsed by celebrities online, and that can’t be marketed and promoted on television. In this case, would anyone care if the Nike checkmark was on a shoe? Probably not.

The post Will Canopy Growth Corp. Become the Nike Inc. of the Recreational Marijuana Market in Canada? appeared first on The Motley Fool Canada.

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