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Why This Dividend Stock Can Provide Your TFSA With Lifelong Income

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Image source: Getty Images

Written by Amy Legate-Wolfe at The Motley Fool Canada

Tax-Free Savings Accounts (TFSAs) have long been a favourite tool for Canadians looking to grow their wealth while minimizing their tax burden. Among the various investment options available for TFSAs, dividend stocks stand out as reliable choices for generating lifelong income. In this article, we will explore the advantages of holding dividend stocks in your TFSA and take a closer look at one of Canada’s prominent Dividend Aristocrats, BCE (TSX:BCE).

Dividend Aristocrats: A path to long-term returns

Dividend Aristocrats are companies known for their consistent track record of increasing dividends over many years. These firms are often considered strong options for income-seeking investors due to their stability and reliability. The concept of Dividend Aristocrats aligns well with the goals of TFSA investors seeking to build a source of income for the long term.

Consider BCE stock

BCE stock, a telecommunications company based in Canada, has been a beacon of stability and growth in the Canadian stock market. BCE stock operates through three segments: Bell Wireless, Bell Wireline, and Bell Media. This provides a wide range of services, including wireless, wireline, internet, television, and digital media.

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Over the last five years, BCE has demonstrated its resilience in a dynamic market:

  • Wireless growth: BCE has experienced significant growth in its wireless segment, with over 10 million mobile phone subscribers. This, coupled with a 4.4% increase in wireless service revenue, reflects its dominance in the Canadian wireless market.

  • Internet expansion: BCE’s investment in fibre technology has paid off, with a 38.2% increase in net fibre activations. The company is on track to complete 85% of its planned broadband buildout program by the end of 2023.

  • Media strength: BCE’s media segment remains diversified, boasting a portfolio of television channels, radio stations, and exclusive content agreements. Crave, BCE’s video-on-demand service, offers a rich array of content, including popular shows from HBO and Starz.

BCE earnings show strong financial performance

BCE stock’s recent financial performance further underscores its potential as a dividend stock for your TFSA. The stock reported a total of 241,516 net activations in various segments, showing robust customer growth.

Consolidated revenue grew by 3.5%, contributing to a 2.1% increase in adjusted earnings before interest, taxes, depreciation, and amortization. Although net earnings showed a decline, adjusted net earnings remained solid, demonstrating stability in cash flows and operational efficiency. BCE’s strong execution in building reliable networks and delivering quality services has helped it maintain its position in the face of competition and inflation.

Why BCE stock is a valuable choice today

One of the most attractive features of BCE stock for TFSA investors is its dividend yield. At the time of writing, BCE stock offers a generous 7% dividend yield. That makes it an appealing income-generating investment option. Additionally, trading at 21.92 times earnings suggests that BCE’s stock is reasonably valued, making it an attractive proposition for both income and growth investors.

Analysts are optimistic about BCE’s future prospects. The company’s investments in fibre technology, continued wireless leadership, and a diversified media unit position it well for sustained growth. With a broad reach and a focus on improving customer experiences, BCE is expected to maintain its competitive edge in the Canadian market.

Bottom line

Incorporating dividend stocks like BCE stock into your TFSA can provide you with a source of lifelong income. BCE’s solid financial performance, robust dividend yield, and strategic investments make it an appealing choice for TFSA investors seeking both stability and growth potential.

As you build your TFSA portfolio, consider the value of Dividend Aristocrats like BCE stock in securing your financial future. With BCE’s strong presence in the Canadian telecommunications and media landscape, your TFSA could be well on its way to achieving your financial goals.

The post Why This Dividend Stock Can Provide Your TFSA With Lifelong Income appeared first on The Motley Fool Canada.

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Fool contributor Amy Legate-Wolfe 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.

2023