Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

Buy These Top Discounted Dividend Stocks in Your TFSA

Published 2019-01-20, 01:00 p/m
Updated 2019-01-20, 01:06 p/m
Buy These Top Discounted Dividend Stocks in Your TFSA

Buy These Top Discounted Dividend Stocks in Your TFSA

You have $6,000 of contribution room for your Tax-Free Savings Account (TFSA) this year. Don’t forget that you may also have remaining contribution room or withdrawal amounts you made from previous years that will add to your contribution room this year.

Use your TFSA contribution room for top dividend stocks, such as Brookfield Asset Management (TSX:BAM.A)(NYSE:BAM) and Enbridge (TSX:ENB)(NYSE:ENB) to outperform the market in the long run.

Buy Brookfield Asset Management and hold it for a long time Real assets used to be only accessible by institutional investors. Today, retail investors like you and me are lucky to have access to these lucrative, cash cow assets via Brookfield Asset Management.

Brookfield Asset Management is one of the largest real asset investors in the world. It focuses on investing in real estate, renewable power, infrastructure, and private equity assets around the globe. So, it’s not only diversified geographically, but it’s also diversified by sector.

Image source: Getty Images.

Brookfield Asset Management earns asset management income and performance-based income and aligns its interests with its shareholders by investing its own money in the four core listed partnerships they manage.

The annualized long-term total returns of an investment in Brookfield Asset Management have been more than 12% as long as you invest in the stock when it’s trading at a good value.

Right now, it is at a good value with the stock trading at about a 20% discount, according to the mean 12-month target of analysts from Thomson Reuters.

A juicy dividend and stable growth make a good combination It costs less and is more efficient to transport oil by pipeline than by rail. That’s what makes Enbridge’s network of critical energy delivery infrastructure valuable. In fact, Enbridge is responsible for transporting roughly a quarter of North America’s crude oil and 22% of its natural gas. Additionally, it delivers two billion cubic feet per day of natural gas in Ontario.

Enbridge employs a low-risk business model, in which 98% of its earnings before interest, taxes, depreciation, and amortization are regulated. This means that its cash flow generation is highly predictable.

Volatile commodity prices have had little impact on the company’s cash flow generation, which has steadily increased over time. On a per-share basis, Enbridge’s cash flow has had some bumps. However, the bumps didn’t stop management from increasing the dividend for 23 consecutive years with a 10-year growth rate of about 15%.

Enbridge already increased its quarterly dividend by 10% this year. And it aims to increase its dividend by 10% again next year. With distributable cash flow estimated to increase at a slower rate of 5-7% after 2020, investors can expect slower growth in the dividend in the future.

That said, with a sustainable yield of 6.2% and distributable cash flow growth of, at worst, 5%, long-term investors can still get a very good rate of return of more than 11% in a quality company.

Investor takeaway Both Brookfield Asset Management and Enbridge are discounted dividend stocks that should be at the top of your list to add to your TFSA right now.

Fool contributor Kay Ng owns shares of BROOKFIELD ASSET MANAGEMENT INC. CL.A LV and Enbridge. The Motley Fool owns shares of Brookfield Asset Management and BROOKFIELD ASSET MANAGEMENT INC. CL.A LV. Enbridge is a recommendation of Stock Advisor Canada.

This Article Was First Published on The Motley Fool

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.