Home » Investing » Bank Stocks » 2 Buy-and-Hold Canadian Dividend Stocks for Your TFSA in 2019
Thanks to the market correction, you can buy Toronto-Dominion Bank (TSX:TD)(NYSE:TD) and this other quality stock on sale!
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Kay Ng
Kay began investing in dividend stocks around 2008 via the concept of value investing. Since then, she has expanded into growth investing, including in small caps. Her passion for investing has only grown over the years! After graduating from UBC with a BSc in Computer Science, she took university courses in financial markets, finance, and financial accounting. She has contributed her works to Motley Fool, Sure Dividend, and Seeking Alpha.
Happy 2019 from the Motley Fool Canada! You should be happy to know that you have $6,000 of contribution room for your Tax-Free Savings Account this year, along with any remaining contribution room you may have from previous years, or any withdrawal amounts you made from previous years that you haven’t contributed back yet.
If you don’t know what to buy, here are a couple of good-value, buy-and-hold Canadian dividend stock ideas that you can consider right now.
Toronto-Dominion Bank is in an outstanding position
For more than a decade, Toronto-Dominion Bank (TSX:TD)(NYSE:TD) has expanded into the U.S. market with great success. The U.S.’s population is about nine times that of Canada’s. Additionally, the country is at the top of the world in terms of being the largest economy with a real gross domestic product of US$18.6 trillion, which is about seven times that of Canada’s.
That’s why some analysts estimate that TD Bank will increase its earnings per share by 3-4% faster than its closest competitors among the Big Five banks. When compounded over many years, a difference of a few percentages will make a marked difference.
In November, TD Bank completed the acquisition of Greystone Capital Management, which helped broaden TD’s investment offerings for its institutional clients. Greystone is focused on investing in alternative assets, such as infrastructure and real estate, which is an income-generating asset class that is largely uncorrelated with public markets.
Greystone adds $35.6 billion in assets under management to TD’s $355.7 billion for a total of about $391.3 billion, making TD Asset Management the largest money manager in Canada.
Right now, you can pick up TD stock at an 18% discount from its normal multiple at $67.30 per share as of writing. It offers a yield of 4%, and if the North American economies chug along, the leading bank can very well increase its dividend by 7-12% per year for the next few years.
Brookfield Asset Management is a good value
Remember the income-generating infrastructure and real estate assets that I mentioned earlier? It used to be that these lucrative cash cow assets could only be accessed by institutional investors. Gratefully, that’s no longer the case!
You can invest in a globally diversified portfolio of real assets across multiple asset classes through one simple investment, Brookfield Asset Management (TSX:BAM.A)(NYSE:BAM). BAM owns, operates, and manages real assets, including
A real estate portfolio with a core office and retail portfolio and an opportunistic portfolio, which aims for higher returns;
An infrastructure portfolio with operations across four sectors: utilities, transport, energy, and data infrastructure; and
A renewable power platform with a concentration in hydro and wind generation.
BAM also invests across multiple industries predominantly in business services, construction, energy, and industrial operations.
BAM aims for long-term returns of 12-15%. But wait … since the stock is trading at a discount right now, you should be able to achieve higher returns. Thomson Reuters has a 12-month mean target of US$$52.60 per share on the stock, which represents near-term upside potential of more than 38% from the recent quotation of US$37.89 per share. It doesn’t matter if you buy the stock on the TSX or NYSE.
Investor takeaway
You’re in luck. The market correction has put TD Bank and Brookfield Asset Management — two quality, buy-and-hold dividend stocks — on sale. Invest in the stocks and watch them grow for a long, long time. Oh, your dividend income from these investments should also increase over time.
You need to own a stock before the Ex-Dividend Date to receive the next dividend payment. If you buy a stock on or after the Ex-Dividend Date, you won't be eligible for the next payment. The dividend will be paid to the seller of the stock instead.
Generally, interest, dividends, or capital gains earned on investments in a TFSA are not taxable either while held in the account or when withdrawn. There are, however, certain circ*mstances under which one or more taxes could be payable with respect to a TFSA.
U.S. stocks held in a TFSA are subject to 15% withholding tax on U.S. dividend income. Withholding tax would apply to other foreign stocks held in a TFSA, with rates starting at 15%, depending on the country. Only Canadian stocks are not subject to withholding tax on their dividends inside a TFSA.
There's no right number of stocks to hold in a TFSA, as it'll depend on your overall risk portfolio. However, it's hard to go wrong with five to 10 blue-chip stocks like TD that can generate both capital appreciation and dividend income.
Dividend received deduction by financial institution
The dividend received deduction will be denied for dividends received after 2023 by financial institutions on shares that are mark-to-market property or tracking property.
AMT starts when the dividends reach $55,002 (2022 $54,403). Federal AMT is applicable for dividends above this amount, until the amount of the dividends reaches $175,218 (2022 $161,215), when the regular federal tax equals or exceeds the minimum amount.
If you hold a TFSA when you leave Canada, you can keep it and continue to benefit from the exemption from Canadian tax on investment income and withdrawals. However, you cannot contribute to your TFSA while you are a non-resident of Canada, and your contribution room will not increase.
It's possible to go over your TFSA contribution limit without knowing it. This happens when you withdraw and deposit money in the same year. It's important to remember that on January 1, you gain two things. The first is more contribution room.
If you have all accounts - non-registered, TFSA and RRSP/RRIF, it is best to keep the investments that attract the highest tax rates inside your TFSA or RRSP/RRIF, and those that attract the lowest rates (Canadian dividends and capital gains) in a non-registered account.
Assets in your TFSA are not subject to departure tax and earnings in the account, as well as withdrawals, will still be tax-free for Canadian tax purposes. However, you will not be allowed to contribute to your TFSA while you're in the U.S., and no contribution room will accrue while you are a non-resident of Canada.
The Canada-U.S. Tax Treaty aims to prevent double taxation of individuals residing in either or both countries. However, it's crucial to note that the TFSA is not recognized as a pension under Article XVIII of the Canada-U.S. Tax Treaty.
Capital gains taxes are very similar to those incurred when buying United States-domiciled stocks. The Canadian government imposes a 15% withholding tax on dividends paid to out-of-country investors, which can be claimed as a tax credit with the IRS and is waived when Canadian stocks are held in US retirement accounts.
The first four months of the year have been referred to as a 'danger zone' for those relying on TFSA contribution room data posted on their CRA account. If you've based your TFSA contributions on “My Account” information, be aware that it may not be accurate.
The best TFSA investments and how to choose between investing in a TFSA and a registered retirement savings plan (RRSP) Your TFSA can generally hold the same investments as an RRSP. That means the TFSA best investments include cash, mutual funds, publicly traded stocks, GICs and bonds.
When you sell and trigger a capital loss, you cannot deduct the loss if you purchase an identical security within 30 days of the settlement date of the transaction. This means you cannot purchase the security 30 days before or after your settlement date.
The company announces when the dividend will be paid, the amount and the ex-dividend date. Investors must have bought the stock at least two days before the official date of a dividend payment (the "date of record") in order to receive that payment. The company pays out the dividend to shareholders.
Another important note to consider: as long as you purchase a stock prior to the ex-dividend date, you can then sell the stock any time on or after the ex-dividend date and still receive the dividend. A common misconception is that investors need to hold the stock through the record date or pay date.
You must have held those shares of stock unhedged for at least 61 days out of the 121-day period that began 60 days before the ex-dividend date. For certain preferred stock, the security must be held for 91 days out of the 181-day period beginning 90 days before the ex-dividend date.
Introduction: My name is Mrs. Angelic Larkin, I am a cute, charming, funny, determined, inexpensive, joyous, cheerful person who loves writing and wants to share my knowledge and understanding with you.
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