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TFSA Set and Forget: 2 Dividend-Growth Superstars for the Long Run

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Written by Joey Frenette at The Motley Fool Canada

Setting your TFSA (Tax-Free Savings Account) and forgetting about it for months or even years at a time can be a great strategy for hands-off investors who want to stay out of their own way as the powers of compounding take hold. Indeed, it’s tempting to trade in and out of stocks every few days or weeks as the bullish and bearish headlines take hold. For new investors, it can be incredibly difficult to temper your emotions when talking heads on television give their opinions on a stock.

By trading too much, especially in your TFSA or RRSP (Registered Retirement Savings Plan), you may just erode your long-term investment edge as you make your brokers rich. Additionally, too much trading in your TFSA is not advisable, as it was designed to be a long-term builder of wealth, not a vehicle for frequent trading. Even if your trades put you up big-time in your TFSA, the Canada Revenue Agency (CRA) may penalize you.


At the end of the day, a set-and-forget (or lazy) strategy for your TFSA seems best for long-term results. The late Charlie Munger, Warren Buffett’s right-hand man, was quite the advocate for sit-on-your-bum-style investing. That entails extremely long-term investing.

In this piece, we’ll take such an approach with the following TSX dividend-growth stocks, which, I believe, only stand to get better over time. Let’s get into the names.

TFI International

First, we have a less-than-load trucking transportation company in TFI International (TSX:TFII), which boasts a $15.7 billion market cap. It’s not quite a mid-cap stock anymore, as the stock has rocked over 300% in just the past five years. The company’s managers seem to be getting more effective at driving efficiencies over time.

As the transportation firm feels the latest macro headwinds, investors seeking to build a long-term position may have a chance to do so after the recent TFII stock correction. Now down close to 16% from all-time highs, shares go for 24.1 times trailing price to earnings (P/E) to go with a rather “growthy” 1.18% dividend yield.

Undoubtedly, the latest first quarter saw sales increase, but earnings came in down quite a bit on a year-over-year basis. Either way, I think the “mixed” results were rather good in today’s rough environment. Once tides turn, TFII stock could be among the first to rally sharply again, continuing its impressing multi-year surge.

CN Rail

CN Rail (TSX:CNR) is a railway gem that’s also one of Canada’s most remarkable dividend growers. The stock currently yields 1.98%, which is quite generous given the company’s history of above-average dividend hikes. At 20.4 times trailing P/E, the stock also looks pretty modestly valued, especially versus its top Canadian rival, which beat it out to acquiring Kansas City Southern.

Further, the firm hiked its dividend by 7% earlier this year in spite of less-than-ideal conditions. That’s a nice hike in a rather mixed and challenged economy.

Moving ahead, I expect CN Rail to make small moves while keeping an eye open for potentially small rail tuck-in acquisitions in Canada and the United States. Undoubtedly, strikes could cause nearer-term headwinds, but the long-term thesis, I believe, is unchanged. CNR stock is one of the names you can stash and forget for decades at a time. Perhaps you’ll be glad you did in as little as 10 years from now.

The post TFSA Set and Forget: 2 Dividend-Growth Superstars for the Long Run appeared first on The Motley Fool Canada.

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Fool contributor Joey Frenette has positions in Canadian National Railway. The Motley Fool recommends Canadian National Railway. The Motley Fool has a disclosure policy.