The Tax-Free Savings Account (TFSA) is unique and far superior to a regular savings account because it can hold most kinds of investments. Its salient features are tax-free money growth and tax-exempt withdrawals.
For 2023, the TFSA contribution limit rose to $6,500 after staying at $6,000 in the last four years. Because we are under inflationary times and the TFSA dollar limit is indexed to inflation, the $500 increase makes perfect sense.
Fortunately, TFSA users don’t have to max out their 2023 annual limit because unused contribution rooms carry over to the following year. However, if you can invest $6,500 outright, Trican Well Services Ltd. (TSX: TCW) and Extendicare (TSX: EXE) are lucrative choices.
Vital well-servicing solutions
Besides the bargain price of $3.16 (-12.58% year to date), Trican Well pays a juicy 5.06% dividend. You can purchase 2,056 shares with your $6,500 limit to generate $328.90 in tax-free passive income in one year ($82.23 every quarter).
The $693.77 company is known in the oil and gas industry for its well-servicing solutions, engineering support, reservoir expertise, and laboratory services. Trican is also Canada’s largest pressure pumping service company. It offers a comprehensive array of specialized products, equipment and services. Customers use them for exploring and developing oil and gas reserves.
Expect the energy stock to rebound following the impressive financial results in Q1 2023. In the three months that ended March 31, 2023, revenue increased 35.7% to $297 million versus Q1 2022. The quarter’s highlight was the 245.2% year-over-year increase in profit to $46 million.
Notably, the free cash flow (FCF) of $69.5 million was 128.6% higher than a year ago. According to management, the strong industry and moderating inflation led to a more sustainable margin profile. It also expects the Canadian market fundamentals for fracturing, cementing, and coiled tubing services to remain strong for the rest of 2023.
Trican’s competitive advantage lies in its newest, most technologically advanced fleet of fracturing equipment. The company deployed the country’s first next-generation fracturing fleets in 2022. Furthermore, it will field its fracturing equipment containing high-pressure pumps by 2024.
Superb recovery
At $7.25 per share (+13.28% year to date), you can partake in Extendicare’s 6.62% dividend. Purchase 896 shares ($6,496) to earn an annual dividend per share of $0.48 ($430.08 total). Since the payout frequency is monthly, you’d have $35.84 monthly.
The $611.8 million company has been providing long-term care (LTC) and home healthcare services in Canada since 1968. Extendicare is recovering from the COVID-19 pandemic, as shown by the improving financials in its operating segments, including managed services.
In Q1 2023, revenue and net operating income (NOI) increased 6.2% and 35.2% to $324.7 million and $44.6 million versus Q1 2022, respectively. Its President and CEO, Dr. Michael Guerriere, said the continuing growth in home healthcare volumes and improvement in LTC occupancy levels are tailwinds for Extendicare.
Buy one or both
TFSA crafters expected the investment account to be popular and widely used by Canadians. Apart from tax-free money growth and withdrawal features, the contribution room increases if you underutilize the account.
Trican Well or Extendicare are ideal holdings in a TFSA for their generous dividends. However, if now is a convenient time to max your $6,500 contribution limit, allocate $3,250 for each to diversify.
