Canadian investors must leverage the benefits associated with registered accounts such as the Tax-Free Savings Account (TFSA) every year. The TFSA contribution limit increased by $7,000 in 2024, taking the cumulative contribution room to $95,000.
Due to its tax-sheltered status, investors can consider holding quality dividend stocks in the TFSA to benefit from a steady stream of recurring payout and share price appreciation.
Let’s see how investing $5,000 in this dividend stock can help you earn $2,706 in passive income in the next 12 months.
An overview of Brookfield Business Partners
Valued at $2 billion by market cap, Brookfield Business Partners (TSX: BBU.UN) is a business services and industrial company. Its operations are diversified across sectors such as industrial, infrastructure services, and business services.
Brookfield Business Partners has the flexibility to invest across industries. Typically, it acquires high-quality business and applies its operational expertise to create value by focusing on enhancing profitability and cash flows. The company aims to generate annual long-term returns between 15% and 20% on its investments.
How did Brookfield Business perform in Q1?
Brookfield Business had a good start to the year and generated solid financial results in the March quarter, fueled by value creation and capital recycling initiatives. In the first quarter (Q1), it reported adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) of US$544 million, increasing the margin to over 20%.
Brookfield believes owning fundamentally strong businesses is a key differentiator of its earnings quality across market cycles. Further, it generated US$300 million from capital-recycling initiatives in the first three months of 2024, including agreements to sell two operations.
“We are pleased with our first quarter results supported by the ongoing performance of our largest operations,” said Anuj Ranjan, chief executive officer (CEO) of Brookfield Business Partners. “We generated strong margins and the progress achieved on our value creation plans is contributing to higher-quality earnings of our operations.”
In the last eight years, Brookfield Business Partners has monetized 20 businesses, generating US$6 billion in proceeds. It has realized a threefold multiple on investments and an internal rate of return of 30%.
Brookfield Business Partners ended Q1 with US$1.5 billion in corporate liquidity. It also has US$7 billion of available liquidity, providing it with the flexibility to support operations and growth.
Over the years, Brookfield Business has taken a balanced approach to capital allocation. In the near term, it wants to reduce borrowings on its credit facility, which the company has drawn as a bridge to fund recent acquisitions.
According to Brookfield, ongoing distributions and future business sales should reduce these borrowings over time. With no significant near-term debt maturities, Brookfield has the flexibility to manage these maturities opportunistically going forward.
The Foolish takeaway
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | CAPITAL GAINS | TOTAL PAYOUT |
| Brookfield Business Partners | $26.42 | 189 | $65 | $2,641 | $2,706 |
An investment of $5,000 in Brookfield Business Partners stock will help you buy 189 shares of the company and earn close to $65 in annual dividends. Further, the stock trades at a discount of 53% to consensus price target estimates. So, a $5,000 investment in the TSX dividend stock could be worth $7,641 in the next 12 months, indicating cumulative gains of $2,706.
