New Investors: A Top Canadian Dividend Stock to Put in Your TFSA for 2018

Here’s why Telus Corporation (TSX:T)(NYSE:TU) deserves to be on your radar.

| More on:

Canadians are searching for different ways to set aside some cash for their retirement years.

In the past, this wasn’t such a big deal, as many people had full-time jobs that came with generous pension benefits.

Today, however, contract work is more common, and when people finally secure a full-time gig, the benefits often come up short compared to those that were available 20 years ago.

As a result, many Canadians are forced to look after their own retirement planning, and using the TFSA to hold dividend stocks is a popular strategy.

Why?

The TFSA protects all earnings and gains from the tax authorities, which means the full value of distributions can be invested in new shares, and when the time comes to cash out, any capital gains are also yours to keep.

Let’s take a look at Telus Corporation (TSX:T)(NYSE:TU) to see why it might be an interesting pick.

Overlooked

Investors often bypass Telus in favour of its higher-profile rivals, but that might be a mistake.

Telus is much larger than many people think. The company has nearly 13 million customer connections, including 8.8 million wireless subscribers, 1.7 million internet clients, 1.1 million Telus TV subscriptions, and 1.3 million residential access lines.

Telus places a strong focus on customer satisfaction. As a result, subscriber growth is steady, and the company is very successful at retaining clients. In fact, Telus regularly reports the industry’s lowest post-paid mobile churn rate.

No media group

Telus has avoided the temptation to spend billions on media assets, but the company is investing in other growth areas, such as the health sector. Telus Health is already a leading provider of digital solutions to doctors, hospitals, and insurance companies.

Some pundits say the lack of a media division is a negative for the company. Time will tell, but it doesn’t appear to be a problem so far.

Dividends

Telus has a strong track record of dividend growth.

The company recently raised the quarterly payout to $0.505 per share, which translates into an annualized yield of 4.2%.

Management is targeting annual dividend growth of 7-10% through 2019.

Earnings

Net income for Q3 2017 came in at $370 million compared to $355 million in the same period last year. Free cash flow more than doubled to $215 million and the company’s wireless average revenue per user rose for the 28th straight quarter on a year-over-year basis.

Should you buy?

Telus continues to deliver steady results and solid dividend growth. The stock tends to hold up well when the broader market hits a rough patch, and the lack of significant competition in the Canadian telecommunications industry bodes well for Telus and its peers.

If you are looking for a buy-and-hold dividend-growth pick for your TFSA, this stock deserves to be on your radar.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Andrew Walker has no position in any stock mentioned.

More on Dividend Stocks

ETF stands for Exchange Traded Fund
Dividend Stocks

How to Earn $2,000 in Passive Income in 2025 With Less Than $51,000 in Savings

You can invest in Canadian high yield stocks via the Vanguard FTSE Canadian High Yield Dividend ETF (TSX:VDY).

Read more »

monthly desk calendar
Dividend Stocks

This 7.8% Dividend Stock Pays Out Every Month

Not all monthly dividend stocks are created equal. And this top stock is certainly a strong choice for passive income.

Read more »

A worker gives a business presentation.
Dividend Stocks

Is TMX Group Stock a Buy, Sell, or Hold for 2025?

TMX Group (TSX:X) stock has been a consistent wealth-builder, generating 4,630% in total returns since 2002. Should you buy, sell,…

Read more »

Man data analyze
Dividend Stocks

2 Deeply Undervalued Dividend Stocks to Buy in November

Here are two stocks that I view as deeply undervalued this November.

Read more »

Dividend Stocks

The 2 Best Canadian Blue-Chip Stocks to Buy Now

Blue-chip stocks can be some of the best stocks to have in any portfolio. But when they're trending upwards, investors…

Read more »

Canadian dollars in a magnifying glass
Dividend Stocks

Here Are My Top 3 Dividend Stocks to Buy Now

These top dividends stocks have consistently paid and increased their dividends. Further, this trend will continue.

Read more »

dividends can compound over time
Dividend Stocks

Want a 7% Yield? The 3 TSX Stocks to Buy Today

These TSX stocks are offering high yields of over 7%, making them attractive for investors seeking steady passive income.

Read more »

how to save money
Dividend Stocks

The Smartest Dividend Stocks to Buy With $200 Right Now

These smartest dividend stocks can consistently pay and increase their dividends in the coming years, irrespective of the macro uncertainty.

Read more »