3 Top TFSA Stocks to Buy for 2020 and Earn Higher Yields

Inter Pipeline Ltd. (TSX:IPL) is one of the three top TFSA stocks that investors should consider buying in 2020.

| More on:

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

As we get ready to welcome 2020, it’s also a good time to look for bargains in the stock market and get your portfolio ready to earn higher yields. If you’re using your Tax-Free Savings Account (TFSA) to build your long-term income portfolio, then it’s also the time to look for some long-term income opportunities.

With this theme in mind, I have prepared a list following three stocks that offer above-average yields and offer a great opportunity for TFSA investors to earn decent passive income when rates on other assets are extremely low. 

Let’s take a deeper look at these top dividend stocks.

Inter Pipeline

Calgary-based Inter Pipeline (TSX:IPL) is a high-yielding stock that could pay off big time down the road. Its yield, which is touching 8%, signals that it’s a risky bet that TFSA investors should avoid.

But IPL runs a diversified business in the energy infrastructure market. It operates a large pipeline network and 16 strategically located petroleum and petrochemical storage terminals in Europe. Its NGL business is one of the largest in Canada.

With its diversified operations, IPL is also expanding fast. In Canada, IPL is in the middle of building a $3.5 billion petrochemical complex near Edmonton to convert propane into polypropylene plastic. 

On the dividend side, the company has been raising its payout annually, though at a slower rate recently amid lingering pressure on its stock price. That negativity is mostly linked with the troubles that Canada’s energy companies are facing these days.

There’s no doubt that IPL stock isn’t for very conservative investors. The company has shown volatility in its earnings with a lot of debt on its balance sheet. But I think the company has the right mix of assets and a diversified revenue stream. In addition to this, IPL is in a strong growth mode that separates it from other risky dividend payers.

RioCan

My second choice for your high-yielding portfolio for 2020 is one of Canada’s largest REITs, RioCan Real Estate Investment Trust (TSX:REI.UN).

In my view, it’s always a good strategy to diversify your TFSA if you have a long-term investing horizon, and real estate stocks come on top of my list. RioCan is one of the safest bets to take exposure to Canada’s robust real estate market. This REIT owns, manages, and develops retail-focused, mixed-use properties located in prime areas.

For TFSA investors, RioCan’s consistent history of rewarding investors is the biggest attraction. At a time when the rates on the fixed-income investments are close to zilch, RioCan’s consistently growing dividend is a great alternative. From its debut on the TSX in 1994 to its peak value in 2015, RioCan returned a total of 2,408%, including distributions. Currently, RioCan pays a $1.44-a-share annual distribution that translates into a 5.5% yield.

BCE

Canada’s top telecom operator BCE (TSX:BCE)(NYSE:BCE) is another quality dividend stock that I recommend adding in your TFSA. Telecom utilities are great cash cows, which, through their growing and recurring revenue base, keep rewarding their investors, and BCE is certainly one of them.

Its 5% dividend yield doesn’t look too attractive when compared with IPL, but I find it attractive, especially when the Bank of Canada is likely to stay on hold or may even cut interest rates.

BCE is a solid dividend-growth stock. Buying BCE stock means you will continue to get a regular increase in the payout. The company has long maintained a policy of increasing its dividend by 5% annually.

As per the company’s dividend policy, the company distributes between 65% and 75% of its free cash flow in payouts. In the past decade, BCE has more than doubled its payout to reward its loyal shareholders.

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

Before you buy stock in BCE, 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 BCE 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 $18,750.10!*

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 35 percentage points since 2013*.

See the Top Stocks * Returns as of 1/22/25

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 has no position in the stocks mentioned in this article.

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

Two senior friends playing beat tennis on sand tennis court
Dividend Stocks

2 Safer, High-Yield Dividend Stocks for Canadian Retirees

Given their solid underlying businesses, consistent dividend payouts, and higher yields, these two dividend stocks are ideal for retirees.

Read more »

Blocks conceptualizing Canada's Tax Free Savings Account
Dividend Stocks

Where to Invest Your $7,000 TFSA Contribution for Long-Term Gains

These stocks have increased their dividends annually for decades.

Read more »

TFSA (Tax free savings account) acronym on wooden cubes on the background of stacks of coins
Dividend Stocks

Use Your TFSA, Earn $145.58 Each Month in Tax-Free Income

Are you looking to create some more income but don't have the time? Use your TFSA and make some every…

Read more »

dividend growth for passive income
Dividend Stocks

2 Passive-Income Stocks to Watch in January

Check out BMO Equal Weight REITs Index (TSX:ZRE) and another intriguing passive-income play this month.

Read more »

dividends grow over time
Dividend Stocks

1 Magnificent Canadian Dividend Stock Down 39% to Buy and Hold for Decades

This stock is a magnificent dividend stock that can withstand crises, generate wealth, and give inflation-adjusted annual payouts is down…

Read more »

clock time
Dividend Stocks

Time to Buy: 1 Dividend Stock Offering a Huge Deal

This dividend stock might be down, but don't keep that from missing out on this major deal.

Read more »

oil and gas pipeline
Dividend Stocks

Canadian Pipeline Stocks: TC Energy vs. Enbridge

Investors seeking to stabilize cash flows in this volatile market can invest in these dividend-paying Canadian pipeline stocks.

Read more »

Person holding a smartphone with a stock chart on screen
Dividend Stocks

Outlook for Rogers Communications Stock in 2025

Rogers stock has been going through a tough time, but what does the future hold for this telecom giant?

Read more »