Start Your TFSA With These 3 Safe Dividend Stocks

Starting your TFSA retirement fund with safe dividend stocks such as Bank of Nova Scotia (TSX:BNS)(NYSE:BNS) is a good strategy for new and young investors.

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

There is no clear saving path for young Canadians who are just embarking on their investing journey. Equity markets and real estate are near their peaks. Bank saving accounts, GICs, and bonds are paying next to nothing.

Despite this dismal situation, young savers have one thing on their side. Their time horizon is one of the major factors in building wealth. The earlier you start, the more you will save, and the better the return you will make on your investments.

In Canada, the Tax-Free Savings Account (TFSA) is a great tool for young savers to launch their retirement funds. This is a tax-free vehicle, meaning you don’t have to pay tax on your capital gains and dividends. You can withdraw your investments anytime without a tax penalty. And any withdrawal doesn’t reduce your TFSA limit.

Here are three safe dividend stocks to launch your TFSA retirement fund.

Canadian banks

Canadian banks should be on the top of your shopping list when you’re starting to build your TFSA portfolio. Canada’s top lenders offer stable and growing dividends. On average, they distribute 40-50% of their income in dividends each year.

Among the top Canadian lenders, Bank of Nova Scotia (TSX:BNS)(NYSE:BNS) is my favourite dividend stock for two reasons.

First, it’s the most international bank with a huge growth potential in the Pacific Alliance — a Latin American trade bloc comprising Mexico, Peru, Chile, and Colombia. This diversification has provided depth to its earnings, as each of these countries has attractive economic fundamentals and a strong banking and regulatory system.

Second, the lender has a great history of rewarding its investors. It has paid dividends every year since 1832, while it has hiked its payouts in 43 of the last 45 years. The history tells us that you can count on Bank of Nova Scotia for a regular income stream.

I do not see this generous dividend policy changing anytime soon, given the bank’s robust international growth and solid position at home. This favourable outlook makes Bank of Nova Scotia a great buy-and-hold stock for your TFSA portfolio.

Utilities 

Energy infrastructure providers and utilities are my next favourite picks for young savers. These companies belong to a market segment which is known for its safety and income growth. These companies operate under fee-based cash flow models, which protect their revenues in any downturn commodity cycle.

Enbridge Inc. (TSX:ENB)(NYSE:ENB) and the Toronto-based Algonquin Power & Utilities Corp. (TSX:AQN)(NYSE:AQN) will suit your investing objectives.

Enbridge operates the world’s longest crude oil and liquids transportation system, which insulates it from the cyclical nature of the commodity markets. The company is a leader in gathering, transportation, processing, and storage of natural gas in North America.

Algonquin is a diversified utility with over $10 billion of assets in the U.S. and Canada. Through its two business groups, Algonquin provides rate-regulated natural gas, water, and electricity services to over 750,000 customers in the U.S.

Both Algonquin and Enbridge are solid dividend stocks for your income portfolio. Enbridge is targeting 10% dividend growth each year until 2020, while Algonquin plans to increase its dividend payout by 10% each year for the next five years.

The bottom line

Investing in dividend stocks that offer growth and stability to your portfolio is a smart way to start your TFSA fund. This is a less-risky approach for young investors. You can take more risky bets, such as investing in high-growth technology stocks, once you have deepened your knowledge about markets and investing.

Should you invest $1,000 in Cameco right now?

Before you buy stock in Cameco, consider this:

The Motley Fool Stock Advisor Canada analyst team just identified what they believe are the Top Stocks for 2025 and Beyond for investors to buy now… and Cameco wasn’t one of them. The Top Stocks that made the cut could potentially produce monster returns in the coming years.

Consider MercadoLibre, which we first recommended on January 8, 2014 ... if you invested $1,000 in the “eBay of Latin America” at the time of our recommendation, you’d have $21,058.57!*

Stock Advisor Canada provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month – one from Canada and one from the U.S. The Stock Advisor Canada service has outperformed the return of S&P/TSX Composite Index by 38 percentage points since 2013*.

See the Top Stocks * Returns as of 2/20/25

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 Haris Anwar owns shares of Enbridge. The Motley Fool owns shares of Enbridge. Enbridge is a recommendation of Stock Advisor Canada.

If You Thought Apple and Microsoft Were Big, You Need to Read This.

The steel industry produced the world's first $1 billion company in 1901, and it wasn't until 117 years later that technology giant Apple became the first-ever company to reach a $1 trillion valuation.

But what if I told you artificial intelligence (AI) is about to accelerate the pace of value creation? AI has the potential to produce several trillion-dollar companies in the future, and The Motley Fool is watching one very closely right now.

Don't fumble this potential wealth-building opportunity by navigating it alone. The Motley Fool has a proven track record of picking revolutionary growth stocks early, from Netflix to Amazon, so become a premium member today.

See the 'AI Supercycle' Stock

More on Dividend Stocks

Canadian dollars are printed
Dividend Stocks

Is Passive Income From Stocks Legit? Here’s How Much You Can Really Make

You can get about 5% per year in passive income, maybe more with high-yield stocks like Enbridge Inc (TSX:ENB).

Read more »

dividends grow over time
Dividend Stocks

2 Canadian Value Stocks for 2025

These two value stocks are prime opportunities for investors looking for strength as well as dividends.

Read more »

chart reflected in eyeglass lenses
Dividend Stocks

TFSA $7K: Where to Invest Right Now

TFSA users can invest their $7K annual limits in two profitable large-cap dividend stocks right now.

Read more »

Paper Canadian currency of various denominations
Dividend Stocks

6% Dividend Yield? Buy This Top-Notch Dividend Stock in Bulk!

This top-notch dividend stock offers a high and sustainable yield of about 6%, enabling you to generate resilient passive income.

Read more »

data analyze research
Dividend Stocks

2 High-Dividend TSX Stocks to Buy for Increasing Payouts

For big dividends with increasing payouts, look more closely at TD and CNQ today!

Read more »

Investor wonders if it's safe to buy stocks now
Dividend Stocks

Better Dividend Stock: TD vs. BCE

TSX dividend stocks such as TD and BCE offer shareholders a tasty dividend yield. But which blue-chip stock is a…

Read more »

Make a choice, path to success, sign
Dividend Stocks

Magna International: Buy, Sell, or Hold in 2025?

Magna International stock: A 5.5% dividend yield and a cheap 8.1 forward P/E – Can the automotive sector stock outrun…

Read more »

Senior uses a laptop computer
Dividend Stocks

Claiming a Home Office on Your 2024 Tax Return? Read This First

You may not be able to claim the home office tax credit, but you can claim the dividend tax credit…

Read more »