As the year winds down and we start thinking about financial plans for 2025, now is the perfect time to prepare for maximizing your Tax-Free Savings Account (TFSA) contributions. The annual limit for 2025 is $7,000. This offers a fantastic opportunity to shelter your investments from taxes and supercharge your wealth-building efforts.
The TFSA is already a beloved tool for Canadians. Yet contributing the maximum amount at the start of the year can significantly enhance your returns by giving your investments more time to grow tax-free. And if you’re strategic about where you put that money, the results can be even more impressive.
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A stock to consider
One excellent candidate for a spot in your TFSA is Yellow Pages Limited (TSX:Y), a Canadian digital media and marketing company that has been quietly making waves in the dividend investing world. While it may not seem like the most exciting stock at first glance, Yellow Pages offers a combination of value, income, and potential growth that makes it highly attractive for long-term investors. Let’s dive into why this particular stock might just be the perfect addition to your TFSA in 2025.
First and foremost, Yellow Pages has a strong track record of returning value to shareholders. The company has been consistent with its dividend payments, offering investors a steady income stream. Its most recent dividend declaration of $0.25 per share translates to an impressive forward annual dividend yield of approximately 8.73%.
Beyond its dividend allure, Yellow Pages’s financial performance demonstrates resilience and potential for future growth. In the third quarter of 2024, the company reported revenues of $52.6 million. Plus, the adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) margin is 23.8%. While there was a year-over-year decline in revenue, the company has made significant strides toward achieving revenue stability. Its cash position is another highlight, with a balance of approximately $43 million as of October 2024, providing a strong financial cushion for future initiatives.
Looking ahead
A deeper look at the numbers reveals even more reasons to be optimistic. With a trailing price-to-earnings (P/E) ratio of 4.69 and a forward P/E of 6.78, Yellow Pages appears to be undervalued relative to its earnings. Its dividend-payout ratio of 36.89% suggests that the company has room to sustain or even grow its dividends, making it an appealing option for income-focused investors.
The company’s forward-looking strategy is another reason to be bullish. In the third quarter of 2024, Yellow Pages saw new customer acquisitions rise by 36% compared to the same period last year. This increase indicates that the company’s efforts to grow its customer base are bearing fruit.
Bottom line
Preparing now to maximize your 2025 TFSA contribution is a smart financial move that can set you up for long-term success. By focusing on dividend-paying stocks like Yellow Pages, you can take full advantage of the TFSA’s tax-free benefits while benefiting from consistent income and the potential for capital gains. With its strong financials, attractive dividend yield, and strategic growth initiatives, Yellow Pages offers a compelling case for inclusion in any investor’s TFSA. The sooner you start putting cash aside for your 2025 contribution, the sooner you can begin reaping the rewards of smart, tax-free investing.
