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TFSA Set and Forget: 1 Dividend-Growth Superstar for the Long Run

Growing plant shoots on coins
Image source: Getty Images

Written by Joey Frenette at The Motley Fool Canada

TFSA (Tax-Free Savings Account) investors seeking to set their portfolios and forget about them for many years should insist on high-quality, wide-moat companies that stand to grow their earnings considerably over time. Indeed, as sales and earnings grow at a steady rate over time, the dividend also stands to grow at an above-average rate.

When it comes to the market’s top dividend growers, it can pay to look at a firm’s dividend-growth history. Has a firm grown its payout in good times and bad? And just how long of an annual dividend growth streak is a firm currently on?

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Indeed, the top dividend-growth stocks may not be the hot, fast-flying plays that are discussed ad nauseam by the talking heads on television. However, they are some of the best long-term plays for TFSA investors looking to get into a “set-and-forget” mode. With such names, you really don’t need to make too much of the day-to-day or even the month-to-month moves. At the end of the day, the fluctuations we concern ourselves over may be nothing more than noise.

TFSA investors: Top dividend growers are worth holding for the extremely long haul!

A lot of the time (especially with the top dividend growers), such noise represents an opportunity to double down on a stock you truly believe in for the long haul. Arguably, long-term TFSA investors should hope for noise to drag down a stock so that they can get more high-quality merchandise at lower prices. Remember, if the fundamentals have not changed, getting more shares for your money is a good thing, not a bad thing!

When you get into this kind of temperament, your odds of outdoing the broader markets over the long haul, I believe, stand to be improved drastically. You need a long-term mindset, patience to let top dividend growers build you wealth over the years, and the discipline to not “chase” the kind of high-momentum trades that everybody else talks about at any given time.

In this piece, we’ll look at one top dividend grower that looks primed for buying this summer.

Manulife Financial

Manulife Financial (TSX:MFC) is a solid dividend-growth play that also has a remarkable amount of newfound momentum riding behind it. The stock has finally awoken, now up close to 60% in the past two years, thanks in part to a few solid quarters. Indeed, the macro environment may be improving, but it’s management that’s also to thank for the recent wave of outperformance.

At $35 per share, I don’t view MFC stock’s run as being over quite yet. The company is firing on all cylinders. Yet, shares remain cheap at just north of 15 times trailing price-to-earnings (P/E). With a nice 4.6% dividend yield and some generous dividend increases likely in the cards over the next few years, MFC stock stands out as a name to just stash in a TFSA until 2030. Manulife is back, and it may just find itself flirting with new highs within the next two to three years.

It isn’t just dividends that should have TFSA investors pounding the table. The company is also cranking up its share-buyback program, with close to $600 million in buybacks to be made per quarter. Indeed, Manulife has been actively buying back in recent years. And it’s about to take things to the next level now that it has more cash on hand.

The post TFSA Set and Forget: 1 Dividend-Growth Superstar for the Long Run appeared first on The Motley Fool Canada.

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Fool contributor Joey Frenette has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

2024