Maximizing your Tax-Free Savings Account (TFSA) contributions to $7,000 each year is one of the most efficient ways to grow your wealth tax-free in Canada. And if you’re looking for an investment that offers stability, growth potential, and dividends, Great-West Lifeco (TSX:GWO) stands out as a strong contender. Let’s explore how you can optimize your TFSA strategy and why GWO might be a perfect fit.
The TFSA
A TFSA is an incredible tool for Canadians aged 18 and over to save and invest without paying taxes on their gains. Whether you’re investing in stocks, exchange-traded funds (ETF), or other financial instruments, the returns you generate within the account stay tax-free. If you haven’t maxed out your contributions in previous years, the unused room carries forward indefinitely, giving you more space to contribute and grow your wealth. Start by checking your available contribution room with the Canada Revenue Agency. It’s as easy as logging into your MyCRA account or giving them a call.
If $7,000 feels daunting, break it down into monthly contributions. By saving around $583 each month, you can steadily hit the annual maximum without feeling the pinch. Many banks allow you to set up automated transfers to make it effortless. Once you’ve committed to this habit, you can focus on selecting investments that align with your financial goals. And that’s where Great-West Lifeco comes in.
GWO stock
GWO is one of Canada’s leading financial services companies. It provides life and health insurance, retirement solutions, and investment services across North America, Europe, and Asia. Its diversified business model offers stability, while its growth in key markets makes it a solid choice for long-term investors. Let’s take a closer look at GWO’s recent performance, future outlook, and why it’s an excellent candidate for your TFSA portfolio.
In the third quarter (Q3) of 2024, GWO reported impressive results, with base earnings hitting $1.061 billion. Up 12% from the same period last year. This growth was fuelled by higher fee income, business expansion, and favourable market conditions. The company has been consistent in its ability to deliver strong earnings, and its performance in the U.S. market stands out. In Q3 2024, U.S. base earnings surged by 35% to US$264 million, thanks to robust fee income and expanding business operations.
GWO’s European segment showed resilience despite facing some challenges. While base earnings dipped slightly to $195 million due to unfavourable group mortality rates in the U.K., the segment still recorded a 10% growth on a pre-tax, constant currency basis. This highlights the company’s ability to adapt and thrive in varied economic environments. Meanwhile, its Capital and Risk Solutions segment contributed significantly, with a 6% increase in base earnings. Driven by favourable claims experience and strong surplus earnings.
A perfect match
Partnered with a TFSA, GWO stock is a solid option. With a forward dividend yield of 4.83%, GWO offers a steady income stream, making it particularly attractive for TFSA investors seeking tax-free dividend income. GWO achieves a balance through its diversified operations and focus on expanding in lucrative markets like the U.S. and Asia. Its forward price-to-earnings (P/E) ratio of 9.98 indicates that the stock is reasonably valued, suggesting potential for price appreciation alongside its dividend payouts.
GWO’s past performance further solidifies its credibility. The stock has shown resilience during market fluctuations, and its ability to maintain profitability and consistent dividends sets it apart from peers. Over the years, GWO has not only grown its revenue streams but also strategically positioned itself in markets with high growth potential. This approach ensures that the company remains a leader in its field.
Adding GWO to your TFSA allows you to take full advantage of tax-free growth while benefiting from a stable investment that delivers regular income. Whether you’re just starting to build your TFSA or looking to enhance an existing portfolio, GWO’s combination of growth, dividends, and stability makes it a compelling choice. Remember, the earlier you contribute and invest, the more time your money has to grow — tax-free.
