Seeking cheap dividend payers for a TFSA? At the same time, though, you don’t want to be caught waiting too long in cash, especially if you were too frightened to buy anything during the brief sell-off we had earlier in the year due to the Iran-U.S. war. With U.S. tariffs threatening to weigh heavily on economic growth on this side of the border, it certainly feels like Mr. Market hasn’t yet got the memo that things could get nastier with the trade war. Either way, tariffs and the pain they could inflict don’t seem to be enough to take away from the tremendous strength seen in the big Canadian banks as well as the energy names and gold miners. Indeed, the TSX Index isn’t exactly the most diversified market in the world, at least from a sector breakdown perspective. But either way, I still think that the Canadian stock market could outperform due to the greater representation of value names relative to the S&P 500.
In this piece, we’ll have a look at a TFSA portfolio with two years’ worth of contributions ($14,000 altogether) and the potential passive income it could produce if invested in a high-quality dividend payer, rather than held in savings for a sub-1% rate. TC Energy (TSX: TRP) looks like a gift that keeps on giving. With a 4.1% dividend yield and a solid history of generous dividend hikes, the latest 13% dip in the name seems like more of an overreaction. A 4.1% yield on $14,000 in invested principal would amount to $574 in a year, or just shy of $48 per month. If held in a TFSA, that would be a tax-free dividend paid out every quarter ($143.50 every three months) for budgeting purposes.
TC Energy’s structural tailwinds are strong: natural gas infrastructure is expected to face constraints due to the growing AI data center buildout. This macro trend is likely overlooked by current sellers. A major firm like Jefferies has upgraded the stock to a buy after the latest valuation reset, suggesting the dip is an opportunity rather than a sign of deeper trouble.
Source: The Motley Fool Canada
