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Slow and steady wins the race when it comes to building retirement wealth. Investors at all stages of their careers can take advantage of their tax-free savings account (tfsa) limit to build diversified investment portfolios that will generate reliable income streams to go along with other pension payments.
The maximum cumulative TFSA contribution space per person is $ 88,000 in 2023. The TFSA limit increase for 2024 will be at least $ 6,500.
Do you have to buy Gic shares or dividends?
Investors who do not want to take any risks should put their money on Guaranteed Investment Certificates (GICs) that are issued by members of the Deposit Insurance Corporation of Canada. The GIC rate is now up to 5.5% for a one-year term and better than 5% for up to five years. This may be all you need.
However, the downside of a piglet is that you don’t have access to the director in case you need money for an emergency. In addition, the rate is fixed for the term of the certificate. People who bought five-year piglets paying 2% rates in 2021 thought they were getting a good deal, but are now hammering themselves for missing out on better returns.
Owning shares of dividends comes with risk. The stock price can fall below the purchase price, and companies that get into trouble sometimes cut or cancel the dividend. When this happens, the share price usually stays under pressure for a long time.
On the positive side, good dividend growth stocks tend to rebound after a market correction, and dividend growth each year increases the return on the initial investment. Shares can also sell quickly if you need to cash in to access funds.
The main shares of the TSX dividend are now traded at discounted prices and many offer yields that are above current GIC rates.
A mix of piglets and dividend stocks is probably the best option for most investors who want to get above-average tfsa returns but don’t want to take too much risk with their retirement savings.
The best Canadian shares of dividend growth
A number of Canadian companies that normally increase their dividend each year now offer very high dividend yields. In the current environment of economic uncertainty, it makes sense to look for stocks that generate stable income in all economic conditions.
BC
BC (TSX: BCE) is Canada’s largest communications firm with a current market capitalization near $ 52 billion. The share price is below $ 58 at the time of writing compared to more than $ 70 at its highest point in 2022.
Higher borrowing costs will put pressure on profits this year, and BCE Media Group is undergoing a restructuring to address declining advertising spending by customers. These issues may persist for some time, but the overall outlook for BCE’s revenue and cash flow is positive, supported by core wireless and wireless network revenues.
Mobile and internet subscriptions are sticky revenue streams. Families and businesses must stay connected with friends, family and customers, regardless of the state of the economy.
BCE expects total revenue and free cash flow to increase in 2023. This should support a solid dividend growth for 2024. The board has increased the dividend by at least 5% per annum for the past 15 years.
At the time of writing, BCE shares offer a dividend yield of 6.7%.
End of TFSA income
BEC is a good example of a high-dividend stock TSX that looks outmoded. Some dividend growth stocks actually have yields above 7% now. An investor can quite easily combine investments in piglets and dividend stocks to get an average yield of 6.3% today.
With a tfsa of just $ 22,000, the 6.3% return will generate $ 1,386 a year in tax-free profits. This works out to $ 115.50 per month!
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