2 top dividend-paying stocks for new TFSA investors
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Canadian investors of all ages use TFSAs to generate tax-free income or build self-managed retirement portfolios in their online brokerage accounts.
ECB (TSX:BCE)(NYSE:BCE) has been a benchmark in retirement and income portfolios for decades. The company generates strong free cash flow to support generous dividends and continues to grow revenue and earnings at a healthy pace.
The emerging 5G network offers BCE a variety of new revenue opportunities in the years to come. The capital investment to build the network is significant, but investors should see the benefits through additional protection of the company’s competitive position as well as improved bottom line.
BCE looks reasonable at the current share price near $65.25 per share and offers a dividend yield of 5.35%. This should make the stock attractive to people looking for passive income as well as investors looking for a defensive anchor stock in their TFSA retirement fund that can offer decent total returns over the long term.
Bank of Nova Scotia
Bank of Nova Scotia (TSX:BNS)(NYSE:BNS) released strong fiscal 2021 results that prove the bank came through the worst part of the pandemic in good shape. Profitability remains strong in the Canadian operations, supported by growth in deposits and loans. A robust housing market has helped boost earnings, and the market is expected to remain strong even as mortgage rates rise.
The Bank of Nova Scotia’s international operations took a hit in 2020, but started to rebound last year and are poised for solid long-term growth. The group primarily focuses on countries in the Pacific Alliance trading bloc, including Mexico, Colombia, Peru and Chile. Banking penetration is only around 50% in these markets, which are home to over 230 million people. As the wealth of the middle class increases over the next few years, the Bank of Nova Scotia should benefit from increased demand for loans and investment products.
Commercial banking opportunities are also attractive. Companies taking advantage of the trade pact need a variety of cash management services, and the Bank of Nova Scotia’s strong position in each of the four countries should give it a competitive advantage.
The Bank of Nova Scotia increased its dividend by 11% with the release of fiscal 2021 results. Another significant increase in payouts may be on the way in 2022. The bank also plans to repurchase shares and may use a part of the excess cash it accumulated to weather the pandemic to make strategic acquisitions. The bank has previously indicated that wealth management opportunities in the United States could be on the radar.
Bank of Nova Scotia shares trade at a reasonable 11.7 times trailing 12 month earnings and offer a dividend yield of 4.4% at the time of writing.
The bottom line of the highest dividend stocks for TFSA investors
BCE and Bank of Nova Scotia pay attractive dividends to TFSA income investors and should be solid anchor choices for those building long-term retirement portfolios. If you have the money to invest in a TFSA, these stocks deserve to be on your radar.