TFSA Contribution Limit Stays at $7,000 for 2025: What to Buy?

This TFSA strategy can boost yield and reduce risk.

| More on:
TFSA (Tax-Free Savings Account) on wooden blocks and Canadian one hundred dollar bills.

Source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Canadian investors have another $7,000 in Tax-Free Savings Account (TFSA) contribution room in 2025. With stock markets trading near record highs, investors are wondering where they can still find good value and get decent returns on their hard-earned savings.

TFSA 101

The government created the TFSA in 2009 to give Canadians an extra tool to invest and save for future financial projects. Since inception, the cumulative maximum contribution space in a TFSA has grown to $102,000 per person. This is large enough to build a decent retirement fund that can complement a person’s company pension, Canada Pension Plan, Old Age Security (OAS), and Registered Retirement Savings Plan (RRSP).

All dividends, interest, and capital gains earned inside a TFSA on qualifying investments are tax-free and can be fully used to reinvest or removed as tax-free income. This is helpful for anyone who is in a higher tax bracket. It is also good for retirees who want to avoid or minimize the OAS pension recovery tax.

GICs or dividend stocks?

Rates offered on Guaranteed Investment Certificates (GICs) were as high as 6% in 2023 but have come down steadily with the reductions in interest rates by the Bank of Canada. At the time of writing, most non-cashable GICs are paying 3% to 3.5%, depending on the term. That’s still better than the current rate of inflation and provides a risk-free source of income.

Dividend yields on some top TSX stocks are quite a bit higher than current GIC rates. However, owning stocks comes with the risk that the share price can drop below the purchase price, and dividends sometimes get cut if a company gets into financial trouble.

That being said, there are a number of TSX dividend stocks that have increased payouts annually for decades and should continue to raise their distributions. Enbridge (TSX:ENB), for example, has increased its dividend in each of the past 30 years.

Created with Highcharts 11.4.3Enbridge PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.ca

The company is working on a $27 billion capital program to drive growth. Extra cash flow from the new assets should support additional dividend hikes. Investors who buy ENB stock at the current price can get a dividend yield of 6%.

Fortis (TSX:FTS) is another stock to consider for dividend growth. The board has increased the distribution annually for the past 51 years. Fortis has a $26 billion capital program underway that will raise the rate base from close to $39 billion in 2024 to $53 billion in 2029. Management expects the resulting boost to cash flow to support planned annual dividend increases of 4% to 6%.

At the time of writing, Fortis provides a dividend yield of 4.2%. That’s still better than a GIC, and the yield on the initial investment rises with each dividend increase.

The bottom line on TFSA investing

The best mix of GICs and dividend stocks is different for every person depending on the return they need to get, their comfort level with risk, and the required liquidity in the investments.

In the current market conditions, investors can quite easily put together a diversified portfolio of GICs and dividend stocks to get an average yield of 4%. That’s comfortably above the current rate of inflation.

Should you invest $1,000 in Enbridge right now?

Before you buy stock in Enbridge, consider this:

The Motley Fool Stock Advisor Canada analyst team just identified what they believe are the Top Stocks for 2025 and Beyond for investors to buy now… and Enbridge wasn’t one of them. The Top Stocks that made the cut could potentially produce monster returns in the coming years.

Consider MercadoLibre, which we first recommended on January 8, 2014 ... if you invested $1,000 in the “eBay of Latin America” at the time of our recommendation, you’d have $20,697.16!*

Stock Advisor Canada provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month – one from Canada and one from the U.S. The Stock Advisor Canada service has outperformed the return of S&P/TSX Composite Index by 29 percentage points since 2013*.

See the Top Stocks * Returns as of 3/20/25

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

The Motley Fool recommends Enbridge and Fortis. The Motley Fool has a disclosure policy. Fool contributor Andrew Walker has no position in any stock mentioned.

Confidently Navigate Market Volatility: Claim Your Free Report!

Feeling uneasy about the ups and downs of the stock market lately? You’re not alone. At The Motley Fool Canada, we get it — and we’re here to help. We’ve crafted an essential guide designed to help you through these uncertain times: "5-Step Checklist: How to Prepare Your Portfolio for Volatility."

Don't miss out on this opportunity for peace of mind. Just click below to learn how to receive your complimentary report today!

Get Our Free Report Today

More on Dividend Stocks

protect, safe, trust
Dividend Stocks

Where I’d Allocate $20,000 in 2 Safer High-Yield Dividend Stocks for Retirement Needs

Here are two safer, high-yield dividend stocks I'm looking at for my retirement needs.

Read more »

A red umbrella stands higher than a crowd of black umbrellas.
Dividend Stocks

3 Reasons I’m Considering Enbridge Stock for a $5,000 Investment This April

I'm considering Enbridge stock to provide some defensive appeal and a juicy dividend to my long-term portfolio.

Read more »

monthly desk calendar
Dividend Stocks

A 9.2% Dividend Stock Paying Cash Every Single Month

With one of the highest dividends out there, this dividend stock deserves attention in your portfolio.

Read more »

Happy golf player walks the course
Dividend Stocks

Build a Powerful Passive Income Portfolio With Just $20,000

If you are worried that the bear market could reduce your savings, these stocks can build a powerful passive income…

Read more »

Hand Protecting Senior Couple
Dividend Stocks

How I’d Use My $7,000 TFSA Contribution to Start Retirement Planning

These TSX stocks have solid fundamentals and are well-positioned to deliver significant tax-free total returns over time.

Read more »

TFSA (Tax-Free Savings Account) on wooden blocks and Canadian one hundred dollar bills.
Dividend Stocks

How to Turn Your TFSA Into a Gold Mine Starting With Only $10,000

It doesn't have to be complicated or scary. You can turn any portfolio into a major gold mine.

Read more »

ways to boost income
Dividend Stocks

Passive Income: How to Invest Your TFSA Limit in 2025

This TFSA strategy can reduce risk and boost yield.

Read more »

coins jump into piggy bank
Dividend Stocks

Here’s the Average Canadian TFSA and RRSP at Age 25

Are you not meeting the average? Then check out this ETF that can bridge the gap.

Read more »