Doubling the value of a stock investment is possible if the holding is a dividend payer and you reinvest the dividends instead of pocketing the cash. The Tax-Free Savings Account (TFSA) is an excellent tool to build wealth because money growth is tax-free. Moreover, any capital appreciation inside the tax-advantaged account will not affect the annual contribution room.
The TSX just had its second-highest close on July 22, 2024, and has been hovering at record levels recently. If you have the appetite to invest this month, three outperforming Canadian stocks from different industries are among the top picks to double your TFSA’s value.
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Oil & gas exploration & production
TFSA investors have the best of both worlds with Whitecap Resources (TSX: WCP). At $10.19 per share, this energy stock outperforms the broader market (+19.19% year to date) and pays a hefty dividend (7.15%). An added incentive is the monthly payout frequency. You can reinvest the dividends 12 times a year, not four.
Using the “Rule of 72” (72 / yield = years), your investment in WCP should double in approximately 10 years. A $7,000 investment today will compound to $14,279.98 in 2034, or an overall growth of 103.99%. Since the COVID year in 2020, Whitecap hasn’t missed a monthly payout and has paid around $1.9 billion in dividends.
In addition to a repeatable, high-quality inventory, the $6.1 billion oil and gas explorer and producer said the operations in its core areas have significant growth potential. Early this month, Whitecap agreed to sell 50% of its stake ($420 million) in the Kaybob complex natural gas processing facility to Pembina Gas Infrastructure.
Asset management
IGM Financial (TSX: IGM) continues to beat the TSX thus far in 2021, +13.48% versus +9.13%. If you invest today, the share price is $38.51, while the dividend yield is an enticing 5.96%. This $9.1 billion wealth and asset management company delivers personalized financial solutions to Canadians and serves institutional investors globally.
Power Corporation is the parent or holding company of IGM Financial. In the first quarter (Q1) of 2024, net earnings declined 41.5% to $223 million compared to Q1 2023. Nonetheless, management maintains a positive outlook. According to its president and chief executive officer, James O’Sullivan, IGM’s business positions have been realigned for future growth across all demographic segments and geographies.
Steel
Stelco Holdings (TSX: STLC) is renowned in Canada’s steel industry. This $3.6 billion Hamilton-based company serve three vital industries: automotive, energy and construction. At $66.07 per share, current investors enjoy a 34.8% year-to-date gain in addition to a decent 3.04% dividend yield.
The steel business thrives amid an inflationary environment. In Q1 2024, revenue increased 8.6% year over year to $746 million, while net income reached $63 million compared to the $11 million net loss in Q1 2023. Notably, operating income soared 572.22% to $121 million from a year ago.
Management’s production and sales efforts focus on products and end markets with the highest profitability and growth potential. However, the latest industry development is that Ohio-based Cleveland-Cliffs will acquire Stelco for $3.4 billion and complete the deal by Q4 2024.
Helpful tip
High-yield, outperforming dividend stocks have a real chance of doubling a TFSA’s value over time. The key is to always check dividend safety, consistency, and sustainability before investing.
