TFSA: 3 TSX Stocks for Every Investor’s $7,000 Limit

Do you want to hear a wild fact? As of recent data, only about 10-15% of Canadians have maximized their Tax-Free Savings Account (TFSA) contributions since the account’s inception in 2009. Despite the benefits of tax-free growth and withdrawals, the majority of Canadians do not fully utilize their available contribution room, which has accumulated to a maximum of $95,000 as of 2024 for those eligible since 2009!

This relatively low percentage suggests that many Canadians may not be fully aware of the advantages of a TFSA or may lack the financial means to contribute the maximum amount each year. Yet when it comes to making the most of your TFSA limit, there are some standout investments that every Canadian should consider: With a combined approach that includes a reliable bank, a stable utility provider, and a diversified exchange-traded fund (ETF), there are choices offering a well-rounded strategy for both growth and income.

Stocks to consider

First up, Royal Bank of Canada (TSX: RY) is a titan in the Canadian banking sector, and for good reason. With a market cap of $210.51 billion, RY provides stability and consistent returns. The bank’s most recent earnings showed a solid quarterly revenue growth of 11.7%, highlighting its resilience in a fluctuating market. With a forward price-to-earnings (P/E) ratio of 11.83 and a dividend yield of 3.82%, RY is not only a strong growth stock but also a reliable income generator, making it a perfect fit for your TFSA.

So, how much could you create for passive income in your TFSA? Let’s say you put $3,000 towards this stock. Here is what that would amount to in dividends.

Hydro One

Next, Hydro One (TSX: H) is a key player in the utility sector, offering the kind of stability that’s hard to find elsewhere. With a market cap of $26.23 billion and a forward annual dividend yield of 2.87%, Hydro One is an excellent choice for those who want consistent, long-term returns. The company’s latest quarterly earnings revealed a 4.4% growth in revenue, reflecting its steady performance. Its low beta of 0.34 means it’s less volatile than the broader market, which is perfect if you’re looking to preserve your wealth while still growing it.

So, again, let’s put $3,000 towards this dividend stock. Here is what that could turn into through dividends this year.

XEI ETF

Finally, iShares S&P/TSX Composite High Dividend Index ETF (TSX: XEI) offers a diversified approach with a strong focus on high dividend yields. This ETF has a yield of 5.21% and a P/E ratio of 11.04. This makes it an attractive option for those who want to maximize income in their TFSA. With net assets of $1.63 billion and a year-to-date total return of 6.84%, XEI provides a balanced mix of income and growth from a wide array of Canadian companies.

Now, a safer dividend sometimes means a smaller dividend. But that’s not the case. So, here’s what you can get from another $3,000 investment.

Bottom line

Together, these three investments cover all the bases: growth, stability, and income. By allocating your TFSA across RY, H, and XEI, you’re setting yourself up for a diversified portfolio that can weather market fluctuations while still delivering solid returns. Whether you’re aiming for long-term growth or steady income, this trio offers the perfect balance for any Canadian investor.

Moreover, the combination of a leading bank, a dependable utility provider, and a high-dividend ETF allows you to spread your risk while taking advantage of different sectors of the market. With these investments, your TFSA can grow in value while providing a consistent income stream, helping you achieve your financial goals with confidence.