Investing in dividend stocks within a Tax-Free Savings Account (TFSA) offers a powerful way for Canadians to grow their wealth. With a TFSA, dividends earned are completely tax-free, and withdrawals do not count as taxable income, making it a top choice for those aiming to build a steady income stream while avoiding the tax burden. When selecting dividend stocks for a TFSA, a combination of stability, growth potential, and a solid history of shareholder returns is key. Let’s explore how OpenText (TSX:OTEX), goeasy (TSX:GSY), and BCE (TSX:BCE) fit this bill perfectly.
OpenText
OpenText is a global leader in information management and cloud-based services, catering to businesses seeking to harness the power of data and artificial intelligence (AI). Recently, OpenText announced its fiscal year 2024 results, reporting total revenues of $5.8 billion — a 29% year-over-year growth.
Despite some challenges in revenue growth last quarter, the company’s quarterly earnings showed a 4.3% increase compared to the same period last year, signalling its resilience. OpenText also introduced a $300 million share-buyback program and raised its annual dividend by 5%, reflecting its commitment to rewarding shareholders. With a forward price-to-earnings (P/E) ratio of 8.55, it remains attractively valued, especially for investors looking to combine stable dividend income with long-term growth in the tech sector.
goeasy
Next, goeasy may be a lesser-known gem, yet it has steadily built a reputation in the financial services sector by catering to non-prime borrowers. Over the years, it has shown phenomenal growth, with its loan portfolio increasing by 30% year over year in its latest quarter to reach $3.65 billion.
The company’s ability to expand during uncertain economic times is a testament to its solid business model and management. Goeasy also boasts a growing dividend, with a forward annual yield of 2.75% backed by a payout ratio of just 27%. This leaves ample room for future increases, making it an appealing choice for those looking to boost their TFSA’s income potential. Moreover, with a robust forward P/E of 8.40, goeasy offers a balance of value and growth for savvy investors.
BCE
Finally, BCE is one of Canada’s most recognized telecommunications companies, continuing to be a pillar of stability and reliable income. Although facing pressures from a highly competitive industry, BCE’s scale and diversified services allow it to weather challenges effectively.
The company’s latest moves, including its acquisition of Ziply Fiber for $5 billion and the sale of its stake in Maple Leaf Sports & Entertainment for $4.7 billion, highlight its strategic focus on streamlining operations and enhancing its market position. While quarterly revenue dipped slightly by 1.8% year over year, BCE’s forward annual dividend yield of over 10% is hard to ignore. With its reliable cash flow and strong commitment to returning value to shareholders, BCE stands out as a core holding for any TFSA focused on income generation.
The perfect trio
Together, OTEX, GSY, and BCE bring a mix of growth potential, robust financials, and generous dividends to the table. For a TFSA investor, these qualities are invaluable. OpenText’s focus on AI and cloud solutions positions it well in a world increasingly reliant on digital transformation. Meanwhile, goeasy’s unique positioning in the lending space taps into an underserved market, driving robust growth that supports its rising dividend. Lastly, BCE remains a beacon of stability, particularly for income-seeking investors who value consistent cash flow, even amid market volatility.
Another significant advantage of these companies is resilience during economic uncertainty. Dividend stocks, especially those with a history of increases like OTEX and GSY, often demonstrate stability during market downturns. This makes them a practical choice for risk-averse investors looking to safeguard their savings while still growing their wealth.
Bottom line
Incorporating OTEX, GSY, and BCE into your TFSA is not just about diversifying. It’s about building a portfolio that works for you in multiple ways. Whether it’s OpenText’s growth in AI and cloud technology, goeasy’s remarkable earnings trajectory, or BCE’s steady dividend yield, these stocks align perfectly with the goals of a TFSA investor. If you’re looking to make your investments work smarter, not harder, these three options could be the winning formula for a thriving, tax-efficient portfolio.
