TFSA Retirees: 3 TSX Stocks With Dividend Yields Up to 6%

Canadian retirees can hold quality dividend stocks such as TC Energy (TSX:TRP) in their TFSA and benefit from a steady stream of tax-free passive income.

| More on:

When you are nearing retirement, you need to look at investments that help you generate a steady stream of income and compliment your retirement payouts. One way to derive predictable and stable cash flows is by investing in blue-chip dividend-paying companies.

Quality companies that pay a dividend also increase shareholder wealth via long-term capital appreciation. Further, if you hold these stocks in your Tax-Free Savings Account (TFSA) you will not have to pay a single penny in taxes to the Canada Revenue Agency. The TFSA contribution limit for 2021 is $6,000 while the maximum cumulative TFSA contribution room stands at $75,500.

Here, we look at three such dividend-paying stocks that should be on the radar of Canadian retirees.

TC Energy

Shares of Canada’s energy giant TC Energy (TSX:TRP)(NYSE:TRP) are trading at $58.7, which indicates a tasty forward yield of 6%. TC Energy is one of the top dividend-paying companies on the TSX and has increased payouts for 21 consecutive years.

It operates one of the largest natural gas pipeline networks in North America and transports 25% of the natural gas consumed in the continent. Its liquids pipeline system also transports about a fifth of all exports from the Western Canadian Sedimentary Basin.

Around 95% of the company’s earnings are secured via regulated or long-term contracts, allowing it to generate steady cash flows and support consistent dividend increases.

TC Energy will continue to invest in capital projects, which will help it expand its base of cash-generating assets. Its strong balance sheet also allows TC Energy to fund acquisitions and fuel top-line growth.

TC Energy is looking to grow its dividend between 5% and 7% in the next few years. Its robust cash flows, strong asset base, and healthy balance sheet make it a top stock for retirees.

Capital Power

Shares of Capital Power (TSX:CPX) are trading at $36.75, which indicates a juicy forward yield of 5.6%. It is focused on operating as a growth-oriented wholesale power producer. It builds, owns, and operates utility-scale generation facilities including renewables and thermal.

Capital Power aims to generate stable and growing cash flows from a contracted portfolio that is supported by an investment-grade credit rating. It has a history of dividend growth and expects to increase payouts by 7% and 5% in 2021 and 2022 respectively.

It ended 2020 with 6,500 megawatts in power generating capacity across 28 facilities. Its total sales stood at $1.93 billion while adjusted EBITDA was $955 million, indicating a healthy margin of about 50%.

Capital Power expects its expansion projects to drive incremental growth in its cash flows and support annual shareholder returns of between 10% and 12%.

Great-West Lifeco

Shares of Great-West Lifeco (TSX:GWO) are trading at $36.75, which indicates a healthy forward yield of 5.22% given its annual dividend of $1.75 per share. Great-West is a financial services holding company and is engaged in life and health insurance, retirement and investment services,  reinsurance, and asset management businesses in Canada, the U.S., and Europe.

With a market cap of $31.5 billion, Great-West is trading at a forward price to sales multiple of 0.5 and a price to earnings multiple of 9.9. Its one of the most undervalued stocks on the TSX given the company is forecast to grow revenue by 13.3% to $62.2 billion in 2021 and by 4.9% to $65.3 billion in 2022. Analysts also expect Great-West to increase earnings by 8.3% in 2021 and by 8.7% in 2022.

If you invest $6,000 in each of these three stocks, you will be able to generate approximately $1,000 in tax-free dividend income in the next year.

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 Aditya Raghunath has no position in any of the stocks mentioned.

More on Dividend Stocks

Hand Protecting Senior Couple
Dividend Stocks

3 Blue-Chip Stocks So Safe Canadians Can Hold Them Until They Die

Canadian National Railway (TSX:CNR) is a stock worth owning for life.

Read more »

stock research, analyze data
Dividend Stocks

14.7% Dividend Yield? Buy Up This Passive-Income Stock in Bulk!

That dividend yield is high, but it still comes with some strong reasons to consider the stock outside of a…

Read more »

Canadian Dollars bills
Dividend Stocks

1 Dividend Stock That Could Create $5,000 in Tax-Free Passive Income in 10 Years

Here's why Fortis (TSX:FTS) certainly looks like a top dividend stock with outsized total return upside worth buying right now.

Read more »

ETF stands for Exchange Traded Fund
Dividend Stocks

The Best Canadian ETFs $100 Can Buy on the TSX Today

Dividend ETFs like BMO Canadian Dividend ETF (TSX:ZDV) can add passive income to your portfolio.

Read more »

space ship model takes off
Dividend Stocks

Is WSP Global Stock a Buy for its 0.6% Dividend Yield?

Here's why investors should look beyond WSP Global stock's tiny dividend yield.

Read more »

hand stacking money coins
Dividend Stocks

6 Percent Dividend Yield? I’m Buying This TSX Passive-Income Stock in Bulk!

Are you looking for a TSX passive-income titan? Here's one stock that pays handsomely that you will regret not buying…

Read more »

Dividend Stocks

Top Canadian Stocks to Buy Now and Hold for a Lifetime in a TFSA

If you want stability in your long-term TFSA, then these four are choices you can pick up again and again.

Read more »

RRSP Canadian Registered Retirement Savings Plan concept
Dividend Stocks

Here’s the Average RRSP Balance at Age 54 for Canadians

ETFs like the BMO Canadian Dividend ETF (TSX:ZDV) tend to be good RRSP holdings.

Read more »