Canada Markets closed

2 Top Dividend Stocks to Own for a Decade in Your TFSA

Andrew Walker

Canadian investors are searching for reliable stocks to add to their self-directed TFSA portfolios.

The best companies to own tend to be ones that have strong track records of paying dividends. Income investors can benefit from the steadily increasing payouts to supplement pensions, while investors who want to build a savings fund can use the dividends to acquire new shares.

The TFSA is an ideal vehicle for both strategies, as all the distributions and potential capital gains are protected from the tax authorities.

Let’s take a look at two stocks that might be interesting picks for your holdings today.

Bank of Montreal

Bank of Montreal (TSX:BMO)(NYSE:BMO) sits in the shadows of its larger peers, and investors often skip the bank in favour of the bigger names in the sector. That might be a mistake in the current environment.

Bank of Montreal has a balanced revenue stream coming from personal and commercial banking, wealth management, and capital markets activities. Most of the revenue comes from Canada, but Bank of Montreal also has a strong American operation primarily serving clients through about 500 branches in the Midwest. The U.S. division helps offset any weakness in Canada, and the U.S. profits can give the overall bottom line a nice boost when the American dollar moves higher against its Canadian counterpart.

Bank of Montreal has paid a dividend every year since 1829. The current distribution provides a yield of 4%.

The stock is down to $99 from the recent high of $106. This isn’t as cheap as we saw in December, but Bank of Montreal is priced at a fair value today.

Canadian National Railway

Canadian National Railway (TSX:CNR)(NYSE:CNI)is widely viewed as one of the best railway companies in North America. Investors like the business for its efficient operations and steady cash flow. CN also enjoys a competitive edge in the industry as the only rail operator that owns tracks connected to three coasts.

CN continues to invest in new locomotives, rail cars, and network upgrades to ensure it remains competitive with other rail carriers and trucking companies. Despite the nearly $4 billion the company will spend on capital projects this year, investors still received a dividend increase of 18% for 2019, and CN is buying back stock under a large repurchase program.

The yield is only 1.8%, but investors should focus on the long-term trend. CN has raised its payout by a compound average rate of better than 16% per year for two decades.

CN is starting to bounce back after the latest dip. The stock is at $122 per share compared to $127 just a few weeks ago.

The bottom line

Bank of Montreal and CN should both be solid buy-and-hold picks for a TFSA dividend fund. Other top companies in the TSX Index are also worth considering for a self-directed portfolio.

More reading

David Gardner owns shares of Canadian National Railway. The Motley Fool owns shares of Canadian National Railway. Fool contributor Andrew Walker has no position in any stock mentioned. Canadian National Railway is a recommendation of Stock Advisor Canada.

The Motley Fool’s purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool Canada’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Motley Fool Canada 2019