High inflation prompted the Canada Revenue Agency (CRA) to adjust the Tax-Free Savings Account (TFSA) annual contribution limit. The limit was $6,000 from 2019 to 2022, but the $500 increase to $6,500 in 2023 is the most significant limit increase since 2015.
Moreover, since TFSA contributions accumulate annually, the lifetime maximum increased to $88,000. The not-so-regular savings account is a long-term investment vehicle. TFSA users hold income-producing assets like stocks in the account because all dividends and gains are tax-free.
Three dividend stocks are your top options today if you need to max out your 2023 TFSA limit or have an unused contribution room. These companies can sustain dividend payments for years because of the captured markets in their respective sectors.
Financial
Canadian Western Bank (TSX: CWB) has endured the headwinds in the banking sector better than the big banks. People thought most regional banks would be distressed, but this $2.79 billion Edmonton bank proved them wrong. At $28.83 per share, the year-to-date gain is 24.31%. The dividend yield is a juicy 4.54%.
Baystreet folks were impressed with CWB’s financial results in the third quarter (Q3) of fiscal 2023. Despite the 19.44% year-over-year increase in the provision for credit losses to $129 million, net income available to common shareholders rose 3% to $83 million. The board also approved and declared a 6.45% increase in the common share.
“We have targeted lending opportunities that provide strong returns within a prudent risk appetite for the current uncertain economic environment,” said CWB president and chief executive officer (CEO) Chris Fowler. “Our secured lending model, prudent underwriting practices and proactive loan management have continued to support provisions for credit losses that remain below the low end of our historical range.”
Consumer staples
North West Company (TSX: NWC) isn’t immune from the elevated market volatility, but the consumer staples stock is doing well (+5.44% year to date). The current share price is $36.28, while the dividend offer is 4.26%. This $1.75 billion retailer provides food and everyday products in far-flung rural communities in Canada, Alaska, the South Pacific, and the Caribbean.
NWC’s earnings release for Q3 fiscal 2023 will be next month, although the results in the preceding quarter are good indicators of what to expect. In the three months that ended July 31, 2023, net earnings increased 17.53% to $38 million versus Q3 fiscal 2022.
Its president and CEO, Dan McConnell, is optimistic about the business’s growth potential. He said NWC will continue to take a balanced approach to managing cost inflation pressures while focusing on finding cost efficiencies and productivity gains.
Technology
Technology is the top-performing sector thus far in 2023. The 39.55% year-to-date gain is surprising considering the impact of rising interest rates on growth-oriented companies. Computer Modelling Group (TSX: CMG) is a rare gem. At only $9.32 per share, current investors enjoy a 63.05% positive return on top of the 2.09% dividend.
The $759.35 million software and consulting firm combines science and technology, and with its deep industry expertise, the business thrives amid a challenging operating environment. In Q1 fiscal 2024, net and total comprehensive income jumped 81% year over year to $6.9 million.
Likely increase
Another increase in the TFSA limit for 2024 is likely if the CRA indexes it again to inflation.
