Maximize Your Retirement Income: How to Turbocharge Your TFSA Returns

TFSA investors could pick different strategies to boost returns.

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The Canadian Tax Free Savings Account (TFSA) is an incredible wealth-building tool. However, most savers underutilize this tool. The average TFSA value is just $23,000, which means Canadians are leaving plenty of contribution room unused. They’re also investing this capital in low interest rate savings accounts. 

Here’s how you can supercharge your TFSA for better returns and better long-term performance. 

Hyper-growth stocks

Some companies benefit from secular growth trends that should last several years if not decades. A tech company in the artificial intelligence space or an e-commerce giant rapidly expanding to new territories are prime candidates. 

WELL Health Technologies (TSX:WELL) is the perfect example of a hyper-growth TSX stock worthy of your TFSA. The company’s revenue has been expanding at an incredible pace. This year, the company expects to deliver $690 millon to $710 million in revenue, which is 24.7% higher than 2022.

Meanwhile, the company’s market cap is up 4,900% since going public in 2016 – a compounded annual growth rate of 74.8% over seven years. 

Assuming a 35% compounded annual growth rate in the near-future, WELL Health could double your investment within three years or so. That’s a much better return than a typical high-yield savings account.  

High-yield dividend stocks

Growth stocks are considerably more volatile, which makes them unsuitable for some investors. If you’re looking for more stable and predictable returns over time, a high-yield dividend stock is a better alternative. 

Enbridge (TSX:ENB) is a perfect example. The energy transportation giant owns and operates one of the largest natural gas and oil pipeline networks in North America. Volume has surged across this network as energy demand soars and exports surge. Which is why the company offers a lucrative 7% dividend yield. 

Enbridge’s 7% yield is far better than the typical 5% interest rate on a Guaranteed Investment Certificate (GIC) right now.

Enbridge also has a track record of consistent dividend growth, so the payout could be higher in the future. But at its current rate, you could double your TFSA investment within 11 years. 

Dividend growth stocks 

If hyper-growth tech stocks are too risky but dividend stocks too boring for you, some stocks seem to strike the perfect balance. These companies offer high payouts to shareholders, but the underlying business is also expanding rapidly so the payouts are likely to grow over time. 

Telecom stocks are a perfect example. Telus (TSX:T) offers a 5.65% dividend yield, which is already higher than the average TSX stock. But the company’s earnings are growing alongside Canada’s population and the ever-increasing demand for data. That’s why Telus has managed to raise dividends by an average of 6.6% every year over the past five years. 

If the stock can manage to sustain its current dividend yield and growth rate it could double your investment within eight years. That’s not as quick as a tech stock but certainly quicker than an energy stock with low growth. 

Dividend growth stocks could be the key to supercharging your TFSA. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Vishesh Raisinghani has positions in Well Health Technologies. The Motley Fool recommends Enbridge and TELUS. The Motley Fool has a disclosure policy.

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