TFSA Dividends: A High-Yielder to Lock in for Decades of Passive Income

For income investors looking to turn their TFSA (Tax-Free Savings Account) into a source of tax-free passive income, there are numerous high-yielders to keep tabs on as the year progresses. Undoubtedly, you don’t want to get drawn into the siren song of super high yields, only to get punished with a dividend cut with a side of some capital losses. That’s why it’s more important to focus on the balance sheet, the growth narrative, and how a payout can appreciate over the long haul.

Sure, it’s nice to go for the 8–10% yield now while worrying about the risks later, especially if the yield has compressed a bit over the near term as a result of potential newfound momentum. As share prices rise, yields go down, which may seem to be a closing window for some investors looking to “lock in” that yield while it’s still above a certain level.

A TFSA is great for tax-free dividends. But don’t chase the too-good-to-be-true yields!

Of course, things do get choppier and riskier the higher you raise the yield bar on the names you plan to own in your TFSA for the long haul. While I’m not completely against pursuing some of the heftier yielders out there, I would form the foundation of a TFSA income fund with some steady dividend payers that have the capacity to keep growing their payouts every single year.

While a 9% yield with no dividend growth left in the tank might seem tempting, I do think that a 6% yielder with a longer dividend streak is relatively more attractive, especially if you’re looking to build an income stream that has a better chance of standing the test of time.

Indeed, building your income portfolio with growth in mind, I believe, makes a lot more sense than sacrificing too much growth (and perhaps risking a loss) for a shot at locking in a dividend yield that might go down as a result of a dividend reduction. Of course, there’s also a big reward to be had if no dividend reduction ever materializes and the fundamentals behind a stock improve in a way to bring forth sustained capital gains.

Enbridge stock: A stellar income stock for the long run

Of course, timing turnarounds is easier said than done. And when it comes to fallen stocks, pain and fundamental deterioration can sometimes beget even more pain and far worse fundamental deterioration.

In terms of high yielders with solid reputations for standing in the investors’ corner, even when they’re on the ropes, either due to industry headwinds or something more company-specific, it’s tough to top Enbridge (TSX:ENB). It makes a strong case for why it’s one of the most shareholder-friendly companies in North America.

Whenever shares dip, and that yield swells, it’s typically a good idea to think about stepping in as a buyer. While shares haven’t been nosediving viciously of late, the stock’s yield has started to rise again amid recent selling pressure. Shares are down mildly (just north of 7%) from highs, with a yield of 5.9%.

Given the steady footing of the payout and the predictable growth projects that’ll keep coming online, I’d argue that Enbridge is one of the steadier high-yielders to stash away for decades. Of course, things could get choppy, especially as analysts look to downgrade over the ever-shifting macro environment. Either way, if you’re a long-term thinker, such dips and sentiment shifts are more of a buying opportunity than anything else.

The post TFSA Dividends: A High-Yielder to Lock in for Decades of Passive Income appeared first on The Motley Fool Canada.

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More reading

• 5.8% Dividend Yield: I’m Buying This TSX Stock and Holding for Decades
• 5 Canadian Stocks to Watch as January Sets the Tone for 2026
• 2 Safer, High-Yield Dividend Stocks for Canadian Retirees
• 3 Blue-Chip Dividend Stocks for Canadian Investors
• 2 Dividend All-Stars Trading at Boxing Day Prices

Fool contributor Joey Frenette has no position in any of the stocks mentioned. The Motley Fool recommends Enbridge. The Motley Fool has a disclosure policy.