TFSA Investors: 2 Dividend Stocks to Buy and Hold for the Next 2 Decades (2024)

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Add these two potentially oversold dividend stocks to your TFSA to generate substantial and tax-free, long-term wealth growth.

The S&P/TSX Composite Indexhas started gaining some traction again, as the roller coaster of a year continues for Canadian stock market investors. As of this writing, the Canadian equity market benchmark index is down by 3.93% from its 52-week high, indicating a 6.87% uptick from its October 27, 2023, level.

While it is too soon to say the market is on the mend, many of the top Canadian dividend stocksstill trade for discounted share prices.

When share prices decline, dividend yields become inflated. Investing in shares of dividend stocks with higher-than-usual dividend yields can be an excellent way to leverage a market pullback to your advantage.

Buying and holding such dividend stocks in a Tax-Free Savings Account (TFSA) means you can enjoy the returns on your investments without incurring capital gains or income tax.

Today, we will look at two of the top dividend stocks trading on the TSX at share prices that are too cheap to ignore.

Toronto-Dominion Bank

Toronto-Dominion Bank (TSX:TD) is a $151.46 billion market capitalization Canadian multinational banking and financial services company. Headquartered in Toronto, it is one of Canada’s Big Six banks and one of the mainstays in many investor portfolios.

Canadian bank stocks have a reputation for being some of the most reliable dividend stocks. Considering TD Bank stock and its dividend-paying streak that began in 1857, it is not surprising to see why.

TD Bank stock has paid its investors a share of its profits for almost 167 years without breaking its streak. In that time, the bank has navigated several economic crises. Besides paying shareholders regularly, it has increased its payouts by 8% over the last five years.

Despite that, it has a healthy 48% payout ratio. Its solid operations, exposure to international markets, and diversification otherwise contribute to its solidity.

As of this writing, TD Bank stock trades for $83.60 per share and boasts a juicy 4.59% dividend yield that you can lock into your TFSA portfolio today.

TC Energy

TC Energy(TSX:TRP) is a $51.68 billion market capitalization North American energy company headquartered in Calgary. Operating in an entirely different industry, TC Energy stock is also a top pick for many Canadian investors for its dividend payouts. While most dividend stocks pay quarterly distributions, TC Energy stock has a monthly payout schedule.

2023 has not been smooth sailing for TC Energy stock. The rise in interest rates to control inflation has weighed heavily on the energy infrastructure giant. TC Energy relies heavily on its debt to fund capital projects.

Rising borrowing costs combined with its Coastal GasLink project costing over double its original budget have negatively impacted the stock. That said, the project is near completion. It means the company is looking forward to getting returns on its investments soon, growing shareholder value.

As of this writing, TC Energy stock trades for $49.81 per share, boasting a juicy 7.47% dividend yield.

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Foolish takeaway

When it comes to dividend investing, TD Bank stock and TC Energy stock are excellent examples to consider. Where one has a dividend-paying streak over a century and a half long, the other pays high-yielding dividends in monthly distributions.

If you have cash to put to work in a TFSAand adequate contribution room available, allocating a portion of it to dividend stocks can be a terrific way to grow your money.

Between the tax-free dividend income, capital gains, and possible compounded growth, you can be a much wealthier investor when you retire.