Why This Dividend Stock Can Provide Your TFSA With Lifelong Income

Retirement plan

The Tax-Free Savings Account (TFSA) is an excellent option for investors wanting to put savings away for life. Each year, we’re given more contribution room to save for our future, but what exactly should investors do with it?

Invest, of course!

Easier said than done. While the TFSA is certainly to be used for investing, there needs to be a strong balance of long-term investments in stable stocks and guaranteed fixed income. Therefore, working with your financial advisor, Canadian investors should determine how much should be invested in, say, a guaranteed investment certificate (GIC).

For sure, dividend stocks are solid options for long-term investors. Over time, you’ll see your returns grow, while during that time also collecting dividends through passive income. What you’ll want to identify are blue-chip stocks ideally. These are companies that are household names and have been around for decades.

In that time, they’ve proven their worth by making it through recessions, downturns, and crashes, and come out the other side. What’s more, these dividend stocks usually distribute dividends, and have done so for numerous years.

A dividend stock to consider

A worthwhile option to consider is a blue-chip dividend stock such as BCE (TSX:BCE). BCE stock is a stalwart choice as Canada’s largest telecommunications company. It holds about 60% of the market, as of writing, and continues to expand with the rollout of its 5G network.

BCE stock has been going through some volatility lately as mergers in the telecom industry threaten to edge in on its client base. However, the company’s media involvement and wireless customers are immense. Therefore, now is a great time to pick up the stock while it’s down, since it’s bound to turn right around as the market evens out, and investors realize what they’ve been missing.

Shares of BCE stock are trading down 8% year to date, with a currently astounding dividend yield at 7.06%. That’s far higher than the five-year average of 5.58%. So this is an appealing option to further fund your TFSA, while taking care of your retirement future as well.

How much you could make

Let’s say you were to max out your TFSA contribution room this year. That would mean you would have $6,500 to put into your TFSA, and let’s say you invest it in BCE stock. Here is what that would get you, with dividends as well.

COMPANYRECENT PRICENUMBER OF SHARESDIVIDENDTOTAL PAYOUTFREQUENCY
BCE$56116$3.87$448.92quarterly

Now you’ve created almost $450 in extra money for your TFSA. All while only spending $6,500, which you can use to reinvest in BCE stock. Which you’ll want to do most likely. After all, it has grown at a 10-year compound annual rate of 2.5% during this downturn. What’s more, its dividend has a CAGR at 5.3%!

Bottom line

BCE stock is certainly an enticing option for investors wanting long-term passive income for their TFSA. The dividend stock has decades of growth behind it, and now is an apt time to buy while shares are down.

While you wait for that turnaround, you’ll be receiving a fair bit more in dividend income than you would during normal market performance. So definitely consider BCE stock as a top dividend stock for your TFSA today.

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

Should You Invest $1,000 In BCE?

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See the 5 Stocks
* Returns as of 8/16/23

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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.