How to Use Your TFSA to Double Your TFSA Contribution

If you’re looking to double up that TFSA contribution, there is one dividend stock I would certainly look to in these times.

Amy Legate-Wolfe

Author Bio

Amy became interested in investing in 2018 after having her first daughter. After receiving a masters degree in journalism from Western University, she became frustrated that the finance industry remained a confusing place for Canadians like her: new parents, millennials, and other young people who needed to understand their finances. Now, Amy focuses on tech companies and renewable energy for growth opportunities, coupling that with long-term investing strategies and equities. She also provides investors with a daily newsletter, Canada Stock Digest, for daily market updates. Her work can also be found at Canada's National Observer, where she writes on the business side of climate action. Before joining Motley Fool Canada, Amy wrote for major news organizations including HuffPost, CTVNews.ca, and CBC. When she’s not researching investing strategies, Amy’s time is pretty much monopolized by her two wild daughters, but in what little spare time she has she loves to do yoga, go on walks with her dog, and travel with her husband.

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Favorite Investment Quote

“October: This is one of the particularly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February.” – Mark Twain

Published December 10, 2024 9:45 pm EST

So, you’re looking to double your Tax-Free Savings Account (TFSA) contribution room of $7,000? While you can’t directly increase the contribution limit set by the Canadian government, you can aim to double your investment through savvy choices. One potential avenue is investing in Manulife Financial (TSX: MFC). Let’s explore why MFC might be a solid option, considering its recent earnings, past performance, and future outlook.

Blocks conceptualizing Canada's Tax Free Savings Account — Source: Getty Images

Manulife stock

Manulife Financial, a leading international financial services group, has demonstrated robust financial health. In the third quarter of 2024, Manulife reported record core earnings and impressive insurance new business results. This strong performance indicates the company’s resilience and growth potential, which are encouraging signs for investors.

The company’s stock has shown a positive trajectory. As of writing, MFC’s stock price stood at $45.90, reflecting a steady increase over the past year. This upward trend suggests that the company is on a solid growth path, which could benefit investors seeking to grow their TFSA investments.

More to come

Looking ahead, Manulife has set ambitious targets. The company aims to achieve a core return on equity (ROE) of over 18% by 2027, up from the 13% recorded in 2018 and over 15% in 2022. This goal reflects Manulife’s commitment to enhancing profitability and delivering greater value to shareholders, indicating a promising future outlook.

Manulife’s strategic focus on the Asian market has been a significant growth driver. In the second quarter of 2024, the company’s earnings from Asia rose by 40%, underscoring the importance of this region in its overall growth strategy. This expansion into high-growth markets could provide additional momentum for the company’s performance.

The company has also been proactive in capital management. Manulife expects to generate more than $22 billion in cash by 2027, focusing on cash generation in a higher interest-rate environment. This strategy enhances the company’s financial flexibility and its ability to invest in growth opportunities, which could positively impact shareholder value.

Considerations

Leadership transitions can influence a company’s direction. Manulife announced that Phil Witherington will succeed Roy Gori as chief executive officer in May 2025. Witherington’s extensive experience in the insurance and financial services sectors is expected to provide continuity and strategic vision. This could be beneficial for the company’s future performance.

What’s more, in terms of dividends, Manulife has maintained a consistent payout, with a forward annual dividend rate of $1.60 and a yield of 3.50% at writing. This steady dividend income can be an attractive feature for investors seeking regular returns within their TFSA.

It’s important to note that investing in stocks carries inherent risks, and past performance is not indicative of future results. However, Manulife’s strong financials, strategic growth initiatives, and commitment to shareholder value present a compelling case for consideration.

Bottom line

By investing your TFSA contribution in a company like Manulife, you have the potential to achieve significant growth over time. While there’s no guarantee of doubling your investment, the company’s positive outlook and strategic direction could enhance the likelihood of substantial returns, especially given a dividend of 3.5% and returns up an incredible 71% in the last year alone at writing!

So, while you can’t directly double your TFSA contribution room, making informed investment choices can help you maximize the growth of your contributions. Manulife Financial’s recent performance and future plans make it a candidate worth considering for your TFSA portfolio.