3 Canadian Dividend Stocks to Buy and Hold for Decades #CanadaFinance

Written by Andrew Walker at The Motley Fool Canada

Retirees and other Tax-Free Savings Account (TFSA) investors are wondering which TSX stocks might be good to buy right now for a self-directed TFSA focused on dividend income and long-term total returns. In a market where the TSX trades near a record high, it makes sense to look for stocks that have good track records of delivering steady dividend growth.

Bank of Montreal (TSX:BMO) paid its first dividend in 1829 and has given shareholders a slice of the profits every year since that time.

The bank is currently Canada’s third-largest by market capitalization. Growth has largely focused on the United States, including the US$16.3 billion purchase of Bank of the West two years ago. The deal added roughly 500 new branches and 1.8 million customers to BMO Harris Bank, the American subsidiary. The acquisition also gave Bank of Montreal a strong platform to expand in the California market.

Things haven’t been all smooth sailing since the purchase closed. The deal was negotiated near the peak of the first post-pandemic rally in bank stocks in late 2021, and Bank of Montreal had to take some heavy provisions for credit losses (PCL) in the past couple of years as rising interest rates put some borrowers in a bad situation.

Looking ahead, however, investors should see the U.S. business drive good growth for Bank of Montreal.

BMO stock is up about 20% in the past six months. Bargain hunters started to buy when the U.S. Federal Reserve began cutting interest rates. The market is also betting that the worst is over for PCL increases.

Investors who buy BMO stock at the current level can get a dividend yield of 4.4%.

Fortis (TSX:FTS) is a good example of a stock that income investors can buy and simply let sit in a portfolio for years. The utility company gets most of its revenue from rate-regulated assets that include natural gas distribution utilities, power generation facilities, and electricity transmission networks. Cash flow from these types of businesses tends to be predictable and reliable, which is one reason Fortis has been able to raise the dividend annually for the past 51 years.

Fortis is working on a $26 billion capital program that will boost the rate base from about $39 billion in 2024 to $53 billion in 2029. Management expects the jump in revenue and cash flow to support planned annual dividend increases of 4% to 6% over five years. At the current share price, investors can get a dividend yield of 4.1% from Fortis.

Enbridge (TSX:ENB) raised its dividend in each of the past 30 years. Investors should see the trend continue as the firm works through a $27 billion capital program to drive revenue growth. The company will also get a boost in 2025 from the first full year of contributions from three American natural gas utilities the company purchased for US$14 billion in 2024.

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