2023 TFSA Contribution Time: 2 Dividend Stocks to Buy With $6,500

TFSA and coins
Image source: Getty Images

Written by Adam Othman at The Motley Fool Canada

Different investors have different saving and investment schedules and practices. Some investors prefer to invest any savings they may have in their Tax-Free Savings Account (TFSA) or another account. In contrast, others may decide to accumulate a sizable sum in savings and then invest.

This makes more sense if you want to invest in dividend stocks because you need at least a few thousand dollars to generate even a modest monthly/yearly passive income from dividends.

If you belong to the latter group and are looking to invest your TFSA contributions in the right dividend stocks, there are two companies that should be on your radar right now.

A utility company

Canadian Utilities (TSX:CU) has most characteristics of a typical Canadian utility company: it offers both electricity and natural gas utility to Canadian consumers (both residential and industrial), has a modest international presence, is leaning towards renewables now, and offers financially sustainable dividends.

However, Canadian Utilities is not an ordinary dividend stock. It is the only Dividend King in Canada that has grown its payouts for 51 consecutive years. There is just one other company that’s on its way to claim that accomplishment, but the third-oldest aristocrat in Canada is about 17 years behind in this race.

This stellar dividend history and a utility business (financially stable and evergreen) make it (arguably) the safest dividend stock in Canada, which is currently quite heavily discounted.

The stock has lost about a quarter of its 2022 peak valuation and has fallen over 16% from the beginning of this year. This has pushed its yield up to 5.8%. The payout ratio is quite stable at 82%, and the valuation is attractive as well, making it a great pick for your TFSA contributions.

A telecom giant

While it’s not the top contender among the 5G stocks in Canada, BCE (TSX:BCE) is a great pick from the highly consolidated telecom sector in Canada, especially for dividends. It has been growing its payouts for 14 consecutive years, and thanks to a hefty 27% discount from its 2022 peak, it’s also offering a mouthwatering 7.2% yield.

BCE is the largest telecom company in Canada by market capitalization and has about 22 million subscribers of different telecom products and services. It has enormous 5G penetration in the country and is capable of offering 5G to about 82% of the Canadian population, making it a strong candidate for an Internet of Things (IoT) boom.

BCE’s dividends are its primary investor attraction, but in the right market conditions, the stock may offer decent capital appreciation as well.

Foolish takeaway

If you are still looking for the right dividend stocks to park this year’s TFSA contributions of $6,500, BCE and Canadian Utilities are options worth considering. With $3,250 in each of the two dividend companies, you can generate about $422 a year in passive income, or a bit over $35 a month.

The post 2023 TFSA Contribution Time: 2 Dividend Stocks to Buy With $6,500 appeared first on The Motley Fool Canada.

Should You Invest $1,000 In BCE?

Before you consider BCE, you'll want to hear this.

Our market-beating analyst team just revealed what they believe are the 5 best stocks for investors to buy in October 2023... and BCE wasn't on the list.

The online investing service they've run for nearly a decade, Motley Fool Stock Advisor Canada, is beating the TSX by 25 percentage points. And right now, they think there are 5 stocks that are better buys.

See the 5 Stocks * Returns as of 10/10/23

More reading

Fool contributor Adam Othman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

2023