The Tax-Free Savings Account (TFSA) is a powerful income-generating account. If an individual can earn $7,500 tax-free income yearly, two heads or couples working together can double the annual earnings.
Spouses or a couple can’t own a TFSA jointly, so the partners must own or set up an account individually to become a power couple financially. For the investment choices, one can use the limit to purchase and accumulate shares of Sienna Senior Living (TSX: SIA), while the other can take a position in Keyera (TSX: KEY).
Strong supply and demand fundamentals
Sienna Senior Living is attractive to income investors for its generous dividend offer and monthly dividends. The $834.75 million senior housing company operates seniors’ living residences and manages residences for third parties. At $11.44 per share, you can feast on the 8.81% yield.
Because you can reinvest the dividends 12 times a year, the TFSA balance grows or compounds faster. Since the TFSA has annual contribution limits, users can’t contribute more than the prescribed limit. Assuming you start in 2024, you must max out the $7,000 limit for 13 years to earn $7,500 in tax-free income yearly.
According to management, growing Sienna’s industry footprint remains a key objective. Besides banking on favourable demand and supply fundamentals, the company will focus on improving the resident experience. In the third quarter (Q3) of 2023, adjusted funds from operations (AFFO) per share increased 19% to $0.269, an improvement for the fourth consecutive quarter.
In the first nine months of 2023, the average total occupancy rate rose to 87.2% from 86.4% a year ago. The net operating income (NOI) increased 12% year over year to $113 million. Due to strong leasing and stabilizing resident move-outs, Sienna also achieved four consecutive months of average same-property occupancy gains (88% in October 2023).
Sienna has the size and scale in the long-term care and retirement segment to maintain its financial strength and capture higher potential growth. More importantly, business stability stems from government-funded long-term care operations.
The crown jewel in service
Keyera in the energy sector is a suitable core holding in a TFSA. The $7.33 billion company is one of Canada’s largest midstream oil & gas operators. If you invest today, the share price is $31.68 (+13.89% year to date), while the dividend yield is 6.31%. You would need around 3,752 shares and 17 years to produce the other $7,500.
The Key Access Pipeline System, or KAPS, is Keyera’s crown jewel. KAPS is a 575-kilometre-long pipeline that transports natural gas liquids and condensate. The route is from northwestern Alberta to Keyera’s natural gas liquids (NGL) infrastructure and condensate network in Fort Saskatchewan, Alberta.
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Its president and chief executive officer, Dean Setoguchi, said Keyera will leverage the strength of its integrated value chain to generate solid returns and maximize shareholder value. He added that the natural gas liquids volume growth fundamentals remain strong. It should generate strong free cash flow to fund dividends and growth capital.
Two are better than one
Please remember that two are better than one, especially in a tax-advantaged account. The TFSA can produce a power couple financially if both partners maximize their annual contribution limits and hold high-yield dividend stocks like Sienna Senior Living and Keyera.
