TFSA Dividend Stock Ranking: 3 Top Picks With Dividends up to 5%

Dividend stocks are best used in your TFSA. CIBC stock, Telus stock, and Canadian Utilities stock are three of my top stock picks for your TFSA.

| More on:

Youโ€™re reading a free article with opinions that may differ from The Motley Foolโ€™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 are income stocks on the TSX that are suited for TFSA users. But when choosing, you should pick strong stocks that are paying at least 4% dividends. Over the long run, your overall total return could be 219% or more.

If I were to give a dividend stock ranking, three names from different sectors stand out.

Top one pick

Canadian Imperial Bank of Commerce, or CIBC, is not the top pick just because it pays the highest yield in the banking sector. Besides being the most generous dividend payer versus industry peers, the fifth-largest bank in Canada has been paying dividends for 151 years.

To some TFSA users, you only need this bank stock to reach a $1 million TFSA balance. If your investment horizon is 30 years, a $230,000 investment could grow to a million with the 5.03% yield.

The moment you park your money at CIBC, you gain an instant hedge against inflation as well as protection from a recession. A dividend stock that offers both on top of sustained dividend payouts deserves to be number one in your portfolio.

Top two pick

Telus (TSX:T)(NYSE:TU) is another sound investment choice that merits the second pick. This $26.99 billion telecom community is one of the three industry pillars. Itโ€™s the third largest as well but boasts of a dividend growth streak of 15 years.

Furthermore, the dividend growth for the last five years is 9.08%. This kind of dividend growth is what you need as a TFSA user. There is a strong likelihood that Telus can pay the 4.67% dividend for decades to come.

The company has been averaging $13 billion in revenue and $1.4 billion in net income over the last four years. Telecommunications products and services in Canada are necessities and not luxuries. Hence, the Wireless and Wireline segments of Telus will continue to generate cash flows.

Telus also provides managed information technology, cloud-based services, business security solutions, and healthcare solutions, among others. Walmart Canada is now the partner of Telus Health through its next-generation pharmacy management solution.

Top three pick

Canadian Utilities (TSX:CU) is my third top pick and a must-have in any TFSA portfolio. This utility stock holds the distinction of having the longest dividend-growth streak (47 years) in the sector.

If you have $50,000 to invest in Canadian Utilities, its 4.2% dividend could create an annual passive income of $2,100, or a monthly stipend of $175. Your capital is not at risk, since the stock is also recession-proof.

Retirement planners, in particular, are after a company with a low-risk business model and strong earnings growth. Canadian Utilities possesses both. Since the business is stable with no constraints, earnings can adequately support dividend payments. You have a worry-free investment regardless of market conditions.

Canadian Utilities is an investment for the long haul. This utility stock will be around for decades to provide you the active income in your later years.

High-quality portfolio

CIBC, Telus, and Canadian Utilities are the hands-down choices if your goal is to create a high-quality stock portfolio within your TFSA. Buy and hold the stocks to receive a steady income stream for as long as you wish.

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

Before you buy stock in Fortis, 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 nowโ€ฆ and Fortis wasnโ€™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 โ€œeBay of Latin Americaโ€ at the time of our recommendation, youโ€™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 โ€“ 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 โ€œofficialโ€ recommendation position of a Motley Fool premium service or advisor. Weโ€™re Motley! Questioning an investing thesis โ€” even one of our own โ€” 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 Christopher Liew has no position in any of the stocks mentioned.

Confidently Navigate Market Volatility: Claim Your Free Report!

Feeling uneasy about the ups and downs of the stock market lately? Youโ€™re not alone. At The Motley Fool Canada, we get it โ€” and weโ€™re here to help. Weโ€™ve crafted an essential guide designed to help you through these uncertain times: "5-Step Checklist: How to Prepare Your Portfolio for Volatility."

Don't miss out on this opportunity for peace of mind. Just click below to learn how to receive your complimentary report today!

Get Our Free Report Today

More on Dividend Stocks

dividends can compound over time
Dividend Stocks

Want a 6% Yield? 3 TSX Stocks to Buy Today

These TSX stocks offer yield of over 6% and are well-positioned to sustain their payouts and maintain consistent dividend payments.

Read more ยป

clock time
Dividend Stocks

10 Years From Now, Youโ€™ll Be Glad You Bought These Magnificent TSX Dividend Stocks 

A decade from now, these 2 dividend stocks could give you strong returns through dividends or capital appreciation, or both.

Read more ยป

Silver coins fall into a piggy bank.
Dividend Stocks

TFSA: 3 Top-Tier TSX Stocks for That $7,000 Contribution

The market is full of great long-term stock to fuel your TFSA. Hereโ€™s a look at three top-tier TSX stocksโ€ฆ

Read more ยป

A plant grows from coins.
Dividend Stocks

3 Top Growth Stocks to Buy for March

These three growth stocks might be excellent holdings to add to your self-directed portfolio this month.

Read more ยป

dividends can compound over time
Dividend Stocks

Sell-Off Opportunity: Why This Beaten-Down Canadian Stock Could Rebound

Nutrien stock might be down now, but long-term investors will certainly reap some major rewards.

Read more ยป

man in suit looks at a computer with an anxious expression
Dividend Stocks

U.S. Stock Market Correction: Hereโ€™s Where We Stand

U.S. stocks are pricey. Canadian stocks like Alimentation Couche-Tard Inc (TSX:ATD) are less pricey.

Read more ยป

A red umbrella stands higher than a crowd of black umbrellas.
Dividend Stocks

Market Correction Coming? These 2 Defensive Stocks Can Protect Your Portfolio

When it comes to essential defensive stocks, these two take the top spots.

Read more ยป

Canadian dollars are printed
Dividend Stocks

Is Passive Income From Stocks Legit? Hereโ€™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 ยป