Letting your hard-earned savings sit idle might not help you achieve your financial goals. Instead, you can use your Tax-Free Savings Account (TFSA) as a powerful growth engine to invest wisely. By holding fundamentally strong TSX stocks with strong growth potential, you can maximize the compounding benefits of your TFSA while enjoying tax-free returns in the long run.
Whether you’re focused on building retirement wealth or funding future goals, selecting the right investments is one of the most important steps you can take to make the most of your TFSA. In this article, I’ll highlight two high-quality TSX dividend stocks that could help you multiply your wealth within a TFSA.
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Veren stock
The first TSX stock TFSA investors can consider in January 2025 is Veren (TSX: VRN), which was previously known as Crescent Point Energy. This Calgary-based oil and gas producer currently has a market cap of $4.8 billion as its stock trades at $7.86 per share after inching up by 11.5% over the last month. At this price, VRN stock has an attractive annualized dividend yield of 5.9%.
This high yield isn’t the only factor making Veren a great stock for your TFSA. When you dig deeper into the company’s recent developments and financial outlook, you’ll find a clear focus on sustainable growth and shareholder returns. While its 2024 results are yet to be released, the company planned to reduce its net debt to $2.5 billion by the year-end, reflecting a big reduction that could help it weather market fluctuations while maintaining strong liquidity.
Moreover, Veren’s operations in high-potential plays like the Alberta Montney and Kaybob Duvernay are yielding impressive results. With top-tier well performance in North America and continued investment in infrastructure to optimize production, the company is striving to improve its operational performance further. Interestingly, Veren’s capital-allocation strategy also prioritizes shareholder value, as it aims to return 60% of annual excess cash flow to shareholders through a combination of dividends and share repurchases.
TD Bank stock
Toronto-Dominion Bank (TSX: TD) underperformed the broader market by a wide margin in 2024 as it slipped over 10% against the TSX Composite’s 18% gains. TD stock currently trades at $77.90 per share with an annualized dividend yield of 5.4%.
Investors’ concerns that the penalty related to TD Bank’s U.S. anti-money laundering challenges could weigh on its financial performance created some headwinds in 2024. However, there’s more to the story than meets the eye. Despite these temporary obstacles, TD’s underlying long-term business fundamentals remain resilient.
In the latest quarter ended in October 2024, the bank reported a strong 26.8% year-over-year increase in net income to $3.6 billion due mainly to higher revenue and strong performance in its Canadian personal and commercial banking segment. Besides its strong financials, TD continues to invest in long-term growth initiatives to boost its digital platforms and expand credit card partnerships.
Given its focus on long-term growth, the recent decline in TD stock could be an opportunity for TFSA investors to buy it at a bargain and lock in a higher dividend yield. This way, you could also expect long-term capital appreciation as the bank gradually regains investors’ confidence based on its robust fundamentals.
