The Tax-Free Savings Account (TFSA) is perhaps the best savings account when it comes to creating passive income. Passive income is income that’s made no matter what you’re doing. Whether it’s walking your dog, grocery shopping, or heck, even sleeping, you’re making passive income.
The idea with a TFSA coupled with passive income is that you’re able to take it out as often as you like. Or you can reinvest it for even more passive income. What’s more, since it’s in a TFSA, you can look forward to taking out and creating as much passive income as you want, tax free!
Yet in this bear market, it’s important to seek out dividend stocks for passive income that remain defensive. Those that are going to do well now and continue to do well in the future. So, let’s look at three dividend stocks in sectors that should continue climbing.
Consumer staples
We need to live, and that means there are certain items that are not frivolous but necessary for our everyday lives. This includes food, health products, and other items that, no matter what the market does, we’re going to need to buy. That’s why consumer staples can be a strong option.
Yet not all places offering consumer staples are going to do well in a bear market. That’s why Dollarama (TSX:DOL) continues to be one of the dividend stocks I would consider for passive income in a TFSA. It offers growth thanks to the company’s ever-growing store locations after a bear market. Yet during one, the company has seen earnings continue to rise, with consumers choosing a cheaper option of shopping.
Shares of Dollarama stock offer a slight 0.27% dividend yield. However, shares are up 28% in the last year! With dividends and returns taken into consideration, that’s quite a lot of passive income to consider.
Constellation Software
I know, a tech stock? But yes, there are also essential tech sectors that investors should consider. Constellation Software (TSX:CSU) isn’t necessarily known for its dividend. But it is known for its stable returns and climbing share price. That’s because the company has invested in essential software companies, acquiring them and refurbishing them to create a powerhouse of essential software products.
Constellation stock, in the last decade alone, has grown over 1,300%, as of writing. What’s more, shares are up 53% in the last year, and it’s officially past the $3,000 mark! So, yes, it’s expensive, but it’s one of the best defensive stocks money can buy at this point — especially as its management team not only continues operations as usual but expands as well.
The company now has a spinoff stock called Topicus.com (TSXV:TOI), providing the company with even more growth with this new stock in Europe. So, even though it has a fairly small 0.18% dividend yield, take into consideration those returns, and you’ve got stellar passive income coming in.
Canadian Utilities
If you’re looking for a more “traditional” dividend stock, then certainly consider Canadian Utilities (TSX:CU). Canadian Utilities stock is one of just two Dividend Kings on the TSX today. The utility stock has increased its dividend each and every year over the last 50 years. That’s stable and increasing passive income you can pretty much always look forward to.
This comes from the utility companies’ stable method of growth. It sees organic growth, as the company increases its utility offerings, creating long-term contracts that will see revenue flow in. However, it also uses that revenue to acquire more businesses, create more revenue, and add even more dividends.
So, if you’re looking for passive income, consider Canadian Utilities stock with its 5.84% dividend yield. It’s a deal with shares down 12% in the last year.
