Even a small investment in a Tax-Free Savings Account (TFSA) can grow into substantial passive income over time. This comes down to the power of compounding and tax-free growth. Even modest contributions, when invested wisely in a TFSA, can lead to significant income generation in the long term without the burden of taxes. So let’s look at one stock that could create massive passive income each and every year.
Power Corp.
If you’re sitting on $10,000 and wondering how to put it to work in your TFSA for some passive income, Power Corporation of Canada (TSX:POW) might just be the perfect fit. This financial giant not only offers a solid dividend yield but also comes with a history of steady performance. This makes it a compelling choice for Canadian investors seeking to grow their wealth passively.
With a forward annual dividend yield of 5.9%, Power Corp is one of those stocks that can provide consistent income. This means your $10,000 investment could generate about $585 a year in dividends, which could be reinvested or used as supplemental income. The company’s payout ratio is a comfortable 49.5%. This indicates the dividends are well-supported by its earnings, and there’s room for growth.
Earnings show room for growth
Power Corp’s recent earnings also paint an encouraging picture. The company reported 44.6% year-over-year growth in quarterly earnings, with a diluted earnings per share (EPS) of $4.39. With a trailing Price/Earnings (P/E) ratio of 8.5, the stock is currently undervalued compared to many of its peers. This provides an opportunity to buy in at a reasonable price. The stock’s Price/Book (P/B) ratio is 1.9, suggesting it’s trading at a premium to its book value. Yet it still offers a good entry point given its stable earnings and strong dividend history.
The company boasts a strong balance sheet, with total cash of $175⁷ billion and a manageable debt level. This gives it the financial flexibility to weather economic downturns while continuing to pay dividends. The revenue growth of 11.5% year-over-year shows that Power Corp is not just sitting on its laurels but actively growing its business, which is key for long-term investors.
What you could create
Investing $10,000 in Power Corp within a TFSA means that all dividends and capital gains are tax-free, maximizing the potential return on your investment. With a history of steady dividends and a strong financial position, Power Corp is a low-risk way to generate passive income, making your money work harder for you without having to lift a finger. In fact, here’s what that $10,000 could get you.
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY | PORTFOLIO TOTAL |
| POW | $38.83 | 258 | $2.25 | $580.50 | quarterly | $10,000 |
So, if you’re looking for a reliable, income-generating investment to include in your TFSA, Power Corporation of Canada offers a combination of stability, income, and growth potential that’s hard to beat. Especially with a strong return of $580.50 annually in dividends! With its strong performance and attractive valuation, this is one investment that could power your passive income strategy for years to come.
