The best Canadian stocks to buy and hold forever in a TFSA

Investors in Tax Free Savings Accounts (TFSA) want shares that they can buy once, hold for decades and compound tax-free. A handful of Canadian companies have the stability, strong cash flow and dividend sustainability to earn that rare buy-and-hold-forever status.

Here’s a look at three of the best Canadian stocks to buy and hold for decades. These are stocks that have proven themselves across multiple market cycles and can become an anchor investment in any TFSA portfolio.

Consider this bank for income and increasing stability

It’s hard to name a list of the best Canadian stocks to buy and hold without referencing at least one of the Canadian big bank stocks. The bank stock for investors to consider right now is also Canada’s most international bank. Bank of Nova Scotia (TSX:BNS).

Scotiabank’s focus on larger international segments has shifted in recent years from developing Latin American markets to mature North American markets. This shift provides the bank with a cleaner and less volatile path to long-term growth.

That’s not to say Scotiabank’s domestic segment isn’t impressive. The bank’s local branch network provides ample income. In addition to asset management and international segments, this offers room for growth and a robust dividend.

That dividend is something that Scotiabank has paid out for more than 150 consecutive years without exception. Today the yield on that dividend is 4.28%. The bank has also increased that dividend annually for more than a decade.

For prospective investors, Scotiabank’s reliable dividends compounded tax-free for decades in a TFSA are reason enough to consider one of the best Canadian stocks to buy now.

A defensive Dividend Knight

Stocks earn the Dividend Knight label when they have delivered 50 consecutive years of annual increases. In Canada there are only two companies that meet this requirement, and Canadian utilities (TSX:CU) is the one with the longest streak.

That streak currently stretches to an incredible 53 years, and the company continues to announce annual increases. At the time of writing, Canadian Utilities is paying a yield of 4.14%.

A major reason for this impressive run is Canadian Utilities’ business model.

Canadian Utilities is one of the larger utilities on the market. Utilities generate a recurring, stable source of revenue supported by long-term, regulated contracts. These contracts often last decades. They also provide Canadian Utilities with the cash flow to invest in growth and continue paying that nice dividend.

That predictable recurring income stream, combined with the inflation-proof appeal of utility stocks, makes this one of the best Canadian stocks on the market.

Investors looking to contribute to a TFSA will appreciate the inflation-protected dividends that can be reinvested tax-free to create an income-generating engine for decades.

All on board the silent compounder that continues to perform better

The best investments include those with which we have direct or indirect contact on a daily basis. Everything from raw materials to chemicals, food products and fuels are transported every day from factories and warehouses to facilities and ports across the continent.

Railroads like Canadian National Railway (TSX:CNR) rakes in nearly $250 billion annually, far more than most people realize. Canadian National’s network extends from coast to coast and through the Midwest to the US Gulf Coast. This gives the railroad a geographic moat that is hard to beat.

More importantly, it also means that Canadian National is very defensive. For any competitors, the enormous cost of building a new network through existing cities on a similar scale would take billions of dollars and decades.

Where the Railroad stands out as one of the best Canadian stocks to own in a TFSA is in its dividend, and by extension, growth. Canadian National offers investors a quarterly dividend of 2.78%. That return may sound lower, but Canadian National boasts double-digit growth over the past decade, solidifying its place on any buy-and-forget list.

Canadian National also offers an impressive three-decade streak of annual increases, making it a solid addition to any portfolio.