The Tax-Free Savings Account (TFSA) gives Canadians an incredible opportunity to grow their wealth without worrying about the burden of taxes on earnings within the account. If you’re looking to maximize your TFSA for regular, tax-free income, investing in stable TSX-listed dividend stocks could be a realistic approach.
In this article, I’ll tell you two safe, dividend-paying Canadian stocks you can consider adding to your TFSA now and expect to earn $2,085 every year in tax-free income. Before I give you the math behind it, let’s quickly review what makes these dividend stocks so attractive for long-term TFSA investors right now.
Brookfield Renewable stock
Brookfield Renewable Partners (TSX: BEP.UN) is the first stock TFSA investors may want to consider buying right now, especially after its recent declines. This renewable energy-focused company has a diversified portfolio of clean energy assets across the globe. It currently has a market cap of $9.1 billion as its stock trades at $31.81 per share after declining by around 18% over the last three months. The stock offers an impressive 6.2% annualized dividend yield at the current market price.
Even though worries about the slowing global economy continue to affect most businesses, Brookfield Renewable is continuing to expand its business operations. In the June quarter, the company’s total revenue jumped 23% YoY (year over year) to US$1.5 billion as it continued to deploy capital across various high-potential markets. Similarly, its quarterly funds from operations rose 9% from a year ago to US$339 million, reflecting its ability to efficiently manage and expand its asset base irrespective of market conditions.
Moreover, Brookfield Renewable’s balance sheet remains strong, with available liquidity of US$4.4 billion, which will allow it to continue investing in new projects and quality acquisitions to accelerate financial growth.
Power Corporation of Canada stock
When it comes to long-term stability and regular dividend payments, Power Corporation of Canada (TSX: POW) could be another attractive option for TFSA investors. This Montréal-headquartered diversified international company mainly manages investments in financial services, renewable energy, and communications sectors. It owns stakes in several major firms through its subsidiaries with a focus on long-term growth.
POW stock currently has a market cap of $23.3 billion as its stock trades at $39.32 per share with a minor 3.8% year-to-date gain. At this price, it offers a decent 5.7% annualized dividend yield.
The underlying strength of its diversified business model could be understood by the fact that Power Corporation’s adjusted earnings in the last 12 months have surged by 44.2% YoY to $4.70 per share, exceeding Street analysts’ expectations of $4.37 per share by a wide margin. Overall, continued strength in Power Corporation’s core operations like Great-West Lifeco and its stable asset management growth brighten its long-term growth outlook.
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND PER SHARE | FREQUENCY | TOTAL ANNUAL PAYOUT |
| Brookfield Renewable Partners | $31.81 | 500 | $0.48 | Quarterly | $960 |
| Power Corporation of Canada | $39.32 | 500 | $0.5625 | Quarterly | $1,125 |
| Total | $2,085 | ||||
| Prices as of Aug 22, 2024 |
Foolish bottom line
If you add 500 shares each of Brookfield Renewable and Power Corporation to your TFSA right now, you can expect to receive roughly $2,085 per year in tax-free income from their dividends. To buy these many shares at their current market prices, however, you’ll have to invest roughly $35,565 in these two companies.
While this example gives you a good idea of how you can use your TFSA to generate tax-free passive income from dividends, you should avoid investing such a large sum of money in just one or two stocks. Instead, diversifying your portfolio by investing in a variety of sectors and companies could minimize your risks.
