Amid heightened market volatility, utilizing a Tax-Free Savings Account (TFSA) for long-term investment has become an increasingly important strategy for Canadian investors seeking to build passive income and capital growth. Equities offer high liquidity, and through appropriate sector diversification, investors can enjoy dividend income while mitigating overall market and specific stock risks.
Recently, Canadian equity markets have seen a significant uptick in volatility, driven by retreating metal prices and the nomination of Kevin Warsh—widely perceived as a hawkish policymaker—as the new Federal Reserve Chair. Concurrently, geopolitical tensions and the potential drag on global economic growth from protectionist policies have further complicated the investment landscape. In this environment of uncertainty, selecting companies with robust operations, predictable cash flows, and a history of dividend growth presents a viable path for TFSA investors to navigate market swings and achieve steady wealth appreciation.
Here are four TSX stocks that balance dividend income with growth potential, offering valuable considerations for your TFSA portfolio.
A&W, an iconic Canadian fast-food brand yielding an attractive dividend, is best known for its classic burgers and breakfast offerings. The company is expanding its menu variety through its partnership with Pret A Manger. While not a high-growth stock, its profitability is expected to outpace inflation over the long term. Currently focused on integrating its operating entities to unlock synergies, A&W is positioned to deliver improved returns in the coming years. Investors should monitor the company’s progress in reducing its debt level over time.
Pembina Pipeline, offering a solid yield, operates a critical energy infrastructure network in Western Canada. With over 85% of its revenue secured under long-term contracts, its utility-like business model provides reliable support for its dividend. The company is deploying excess cash flow into attractive growth projects, such as the Cedar LNG export terminal in British Columbia. As one of the more compelling valued major energy infrastructure players in Canada, Pembina maintains a strong balance sheet and a track record of consistent annual dividend increases.
Fortis, with a stable dividend yield, serves over 3.5 million utility customers across North America and the Caribbean through nine regulated electric and natural gas businesses. Its low-risk transmission and distribution assets insulate earnings from significant market volatility, contributing to an impressive 20-year average annual total shareholder return of 9.7%. The company boasts an extraordinary 52-year streak of annual dividend increases and is advancing a massive five-year, $28.8 billion capital investment plan. This initiative is projected to grow its rate base at an annualized rate of 7% through 2030, underpinning management’s target of 4–6% annual dividend growth through the decade.
This leading solid waste management company has delivered outstanding annualized returns over the past decade. By strategically focusing on secondary and exclusive markets with limited competition, it commands superior margins. Growth has been fueled organically and through persistent acquisitions, including over 100 deals since 2020 that added approximately $2.2 billion in annualized revenue. Supported by robust cash flows and a healthy balance sheet, management continues to pursue an active acquisition strategy, with a pipeline capable of contributing an estimated $5 billion in annualized revenue. Further margin expansion is anticipated from technology investments in recycling facilities and operational enhancements.
In a volatile market, constructing a portfolio focused on stable cash flow and sustainable growth is paramount. These four stocks span consumer services, energy infrastructure, utilities, and environmental services. They not only offer compelling income potential but also possess distinct advantages in their business models, asset quality, or growth pathways, making them well-suited as long-term TFSA holdings designed to balance reliable dividends with capital appreciation.
