The Tax Free Savings Account, or TFSA, was introduced in 2009. This registered account has grown in popularity over the years, given its tax shelter status. The maximum cumulative contribution limit for the TFSA is $ 75,500; for couples, the amount doubles to $ 151,000.
Any withdrawal from the TFSA in the form of dividends, interest or capital gains is exempt from tax by the Canada Revenue Agency. Since interest rates are near their all-time low, it makes sense to own blue-chip dividend-paying stocks in your TFSA and create a steady stream of recurring income.
In retirement, you will need multiple sources of income, as it does not make sense to rely solely on payments from the Canada Pension Plan, or CPP. For example, the maximum monthly amount a new beneficiary can receive starting their pension at age 65 is $ 1,203.75, while the average monthly payment is $ 619.75. We can see that the CPP is not enough to lead a comfortable retirement life.
Retirees can look to take advantage of the benefits of the TFSA and earn tax-free dividend income each year, which will supplement CPP and other retirement benefits. We’ll take a look at several Canadian stocks that have strong fundamentals and tasty dividend yields that should be on the radar of TFSA retirees.
Some of the largest Canadian companies are in the banking industry. Over the past year, the Big Six banks have showcased their resilient fundamentals, emerging almost unscathed from the pandemic-induced recession. The Bank of Canada is likely to lift restrictions on return on capital on banks, which means investors should prepare for a series of solid dividend increases.
The main Canadian banks offering attractive returns are:
- Toronto-Dominion Bank: 3.6%
- Bank of Montreal: 3.3%
- Bank of Nova Scotia: 4.5%
Pipeline inventory for your TFSA
As oil producers have been crushed amid COVID-19, middleman companies that have a fee-based business model have become attractive bets. A contract-based business typically suggests that cash flow will be assured throughout economic cycles, allowing pipeline companies to increase their dividends over time. Here are three Canadian pipeline companies that have a diverse base of cash-generating assets:
- Enbridge: 6.8%
- TC Energy: 5.6%
- Pembina pipeline: 6.4%
Renewable energy stocks
The move towards clean energy solutions makes renewable energy companies obvious choices for long-term investors. The increase in capital spending will increase the asset base of renewable energy companies and support rising dividends going forward. Some quality actions that are part of this sector are as follows:
- Algonquin Power & Utilities: 4.4%
- Renewable energies TransAlta: 4.5%
- Capital power: 4.9%
- Brookfield Renewable Power: 3.3%
The telecommunications industry is fairly recession proof as people will continue to pay their phone and Internet bills through good times and bad. The upcoming transition to 5G will be a key revenue driver for telecom companies in the coming quarters.
The major telecommunications companies in Canada are:
- AEC: 5.8%
- Telus: 4.6%
- Rogers Communications: 3.1%
Madness to take away
These are just a few blue chip companies that are part of the Canadian stock market. You can identify several other stocks that have strong financial results and stable cash flow as well as attractive dividend yields. If you split $ 151,000 evenly among the stocks mentioned above, you could get close to $ 7,000 in annual dividends, or $ 582 in monthly payments.
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This article represents the opinion of the author, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We are straight! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer, so we post sometimes articles that may not conform to recommendations, rankings or other content. .
The Motley Fool owns shares and recommends Enbridge. The Motley Fool recommends PEMBINA PIPELINE CORPORATION, ROGERS COMMUNICATIONS INC. CL B NV and TELUS CORPORATION. Insane contributor Aditya Raghunath owns shares of Enbridge Inc., Capital Power Corporation, Algonquin Power & Utilities Corp., Brookfield Renewable Partners LP and TransAlta Renewables Inc.