New Investors: How to Turn a $10,000 TFSA or RRSP Into $179,000

The market correction gives new investors the opportunity to buy quality TSX shares at bargain prices for a Self-Directed Tax-Exempt Savings Account (TFSA) or Registered Retirement Savings Plan (RRSP) portfolio. A popular investment strategy is to own top dividend stocks and use the payout to buy new stocks. This sets in motion a compounding process that can turn modest initial investments into significant savings over time.

fortis

fortis (TSX:FTS)(NYSE:FTS) is a good stock for a TFSA or RRSP that focuses on both passive income and total returns. The board has increased the dividend for each of the last 48 years, and management expects the payout to grow at an average annual rate of 6% through at least 2025.

Revenue and cash flow growth will result from the current $20 billion capital program. When the new plants go into operation, the tariff base is expected to increase by around a third by the end of 2026. Fortis also has a long history of making strategic acquisitions to drive additional revenue and profit growth. It wouldn’t be a surprise if Fortis made another deal as the utility industry consolidates. The company added a mergers and acquisitions specialist to its leadership team last year.

Fortis is trading at nearly $59 per share as of this writing, compared to more than $65 earlier this year. The pullback seems overdone and investors can now earn a decent 3.6% yield. The Dividend Reinvestment Plan (DRIP) offers a 2% rebate on new stock purchases.

Long-term investors have done well with Fortis stock. A $5,000 investment in Fortis 25 years ago would be worth about $85,000 today if the dividends were reinvested.

v. Chr

v. Chr (TSX:BCE)(NYSE:BCE) is trading near $63 a share compared to more than $73 in April. The pullback seems overdone given BCE’s strong first-half results and the essential naturalness of its internet and mobile services as we head towards a potential recession.

BCE generated adjusted net income of $791 million for the second quarter (Q2) of 2022, an increase of 5.3% over Q2 2021. Free cash flow improved 7.1% to $1.33 billion. BCE raised its dividend by 5% for 2022. That’s in line with the average annual increase over the past 14 years, and investors should see another increase in the 5% range in 2023. BCE says it’s on track to return adjusted earnings. Per share growth of 2-7% in 2022 and free cash flow growth of 2-10%.

BCE is known as a good passive income stock because of its high yield and reliable payouts. Investors who buy at current levels can get a dividend yield of 5.8%. Investors with a long-term perspective have also achieved decent total returns. A $5,000 investment in BCE 25 years ago would be worth about $94,000 today if the dividends were reinvested.

Bottom line, the top stocks to buy for a TFSA or RRSP

Fortis and BCE pay attractive dividends that should continue to grow. If you’ve got some cash to put in a self-directed TFSA or RRSP focused on dividends and total returns, these stocks deserve to be on your radar.