There are many ways to get to a $100,000 Tax-Free Savings Account (TFSA). The way I’m about to discuss is a simple method with below-average risk, which should help you avoid common TFSA mistakes.
Before I get to what to invest in your TFSA, here’s the general idea.
The gist of our strategy to get to a $100,000 TFSA
Firstly, the TFSA is a savings tool before it’s an investment tool. So, you’ve got to put money in regularly to get your TFSA growing.
Secondly, because we can’t use capital losses to offset capital gains in TFSAs, we’re going to take reduced risk in the account. Specifically, we aim to buy quality stocks that have durable profitability — but only when they’re trading at fair or better valuations.
Thirdly, we want to hold largely proven dividend-growth stocks that offer decent dividend yields of 3-5% (at least initially). This is because we’re pretty late in a bull market (more than 10 years in since the low of the last market crash).
The defensive stance will give us a positive return from decent dividends even in a market downturn. The extra capital from the dividends can be reinvested for more shares at such a time.
Fourthly, we’re aiming for long-term returns of 10% per year, which is very reasonable for blue-chip dividend-growth stocks that offer yields in the range of 3-5%.
Generally, dividend-growth stocks are a conservative way to invest in the stock market. Typically, they’re mature companies that generate sufficient earnings or cash flows to pay a generous dividend and maintain and grow the business.
This Telecom offers a growing dividend
It’s been a long time since TELUS (TSX:T)(NYSE:TU), the third-largest Canadian telecom has hit my minimum yield target of 4.7%.
The dividend is safe, and the stock is reasonably valued — not a bargain and not excessively expensive. At ~CAD$46 per share, TELUS trades at a P/E of ~16, while it’s estimated to increase its earnings per share (“EPS”) by 6.5-7.1% per year over the next 3-5 years.
At current levels, TELUS can deliver 8-11% per year on average over 3-5 years.
This first appeared as 1 of 7 top Canadian dividend ideas for September 2017 in the Seeking Alpha Marketplace service DGI Across North America.
If you’re looking for one energy stock to invest in that “has it all”, it’d be Enbridge Inc. (TSX:ENB)(NYSE:ENB). As an energy infrastructure company, it is a safer investment than oil & gas producers. Moreover, it’s a leader in its space.
A Diversified Portfolio
Enbridge transports 28% of the crude oil produced in North America, including nearly 100 commodities or refined products.
Enbridge also gathers, transports, processes, stores, and distributes natural gas. So, it plays a key role in North America’s transition from coal to cleaner energy — natural gas and renewable energy.
Since 2002 the company has begun investing in renewable energy with a primary focus on wind generation.