TFSA Dividend Investors: 2 High-Yield Stocks to Increase Tax-Free Income

Owning dividend stocks inside a TFSA is a great way to generate income and not pay any of the earnings to the CRA.

| 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

Canadian retirees and other income investors are constantly searching for reliable dividend stocks to help put some extra cash in their pockets.

Letโ€™s take a look at two high-yield stocks that might be interesting picks right now for a TFSA income portfolio.

IPL

Inter Pipeline (TSX:IPL) operates oil sands pipelines, conventional oil pipelines, and natural gas liquids (NGL) processing assets in Canada. The company also has a bulk liquids storage business in Europe with 23 terminals providing 37 million barrels of storage capacity in several countries, including the U.K., Ireland, Denmark, Germany, Sweden and the Netherlands.

The stock price is down amid concerns that the company might have to take on too much debt to complete its capital projects, including the $3.5 billion Heartland Petrochemical Complex.

The facility will turn cheap propane into plastics used for manufacturing a wide range of products and is targeted for completion in late 2021.

In 2019, IPL indicated that it was considering selling the European operations to help fund the Canadian developments. While thatโ€™s still a possibility, IPL wonโ€™t sell unless it gets a reasonable price for the assets.

The companyโ€™s payout ratio through the first three quarters of 2019 was about 80%, so the dividend should be safe. In the event that IPL announces a sale of the European division, the stock could catch a nice lift.

Another possibility is a takeover. The company reportedly refused an offer for as much as $30 per share last year. At the time of writing, IPL trades for less than $22.

Investors who buy today can pick up an attractive 7.8% dividend yield and potentially realize a nice gain on any news of an asset sale or a buyout bid.

BCE

BCE (TSX:BCE)(NYSE:BCE) is a leader in the Canadian communications industry with assets spanning the country. The companyโ€™s reach  gives it the ability to connect with most Canadians on a daily basis.

When Canadians send a text, call a friend, check e-mail, stream a movie, download a song, listen to the radio, watch TV, or shop online, the odds are pretty good that BCE is involved somewhere along the line.

The companyโ€™s wire line and wireless networks provide TV, internet, and mobile services. The media assets, which include a television network, specialty channels, sports teams, and radio stations deliver popular content.

BCE is investing billions of dollars to upgrade its network infrastructure to ensure it meets customer demand for high-speed broadband and is running fibre optic lines right to the premises of residential and commercial clients, giving BCE a competitive edge and helps retain customers.

BCE pays a generous dividend thatโ€™s adequately supported by rising free cash flow. The current payout provides a yield of 5%.

Low interest rates are expected to remain in place for some time, which should benefit BCE. Reduced borrowing costs make more cash available for distributions and unattractive rates on GICs drive investors toward reliable dividend stocks, such as telecoms and utilities steady revenue streams.

The bottom line

IPL and BCE offer above-average dividends that should be safe. An equal investment between the two stocks would generate an average yield of 6.4%. Thatโ€™s a lot higher than the 2% you get on a GIC right now from the big Canadian banks.

Diversification is always recommended, and the TSX Index has a number of reliable high-yield stocks that TFSA investors can buy to help boost their income.

Should you invest $1,000 in Air Canada right now?

Before you buy stock in Air Canada, 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 Air Canada 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 Andrew Walker owns shares of BCE.

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

Caution, careful
Dividend Stocks

Sell-Off Alert: Why These TSX Blue-Chip Stocks Look Undervalued Now

These TSX stocks look mighty valuable right now, and come with outlooks that make each prime for the picking.

Read more ยป

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