TFSA Contribution: Use it to Double Your Investment

There’s nothing holding you back from turning some cash into loads of cash, and a TFSA and investments are the way forward.

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If you’re aiming to double your Tax-Free Savings Account (TFSFA) contribution, the journey starts with strategic choices. The TFSA offers Canadians an incredible opportunity to grow their investments tax-free. Yet to maximize returns, a thoughtful approach is necessary. Start by selecting stocks with strong growth potential, like CGI (TSX:GIB.A), a shining star on the TSX. Let’s delve into why CGI is a compelling choice and how to align your investments to double your contributions.

CGI stock

CGI, a leader in IT and consulting services, has consistently delivered robust financial performance. As of its most recent earnings report (Q4 2024), the company achieved a 5.2% year-over-year growth in quarterly earnings. Underlining its ability to expand even in challenging economic conditions. Its revenue for the trailing 12 months reached $14.68 billion, with a solid profit margin of 11.53%. This stability positions CGI as a reliable growth stock with room for further upside.

Looking at past performance, CGI’s trajectory has been nothing short of impressive. Over the last decade, the stock has risen significantly, reflecting the company’s capacity to adapt to evolving market demands. For instance, its operating cash flow stands at a healthy $2.2 billion, supporting ongoing investments in innovation and acquisitions — key drivers of its long-term growth.

The future outlook for CGI is equally promising. Analysts have maintained a bullish stance, citing CGI’s strategic expansion into artificial intelligence (AI) and cloud computing — two sectors with exponential growth potential. With a forward price-to-earnings (P/E) ratio of 19.08, the stock remains attractively valued compared to its peers in the tech sector. The company’s commitment to enhancing shareholder value, evident in its consistent share buybacks, further bolsters its investment appeal.

Make it a double

Now, doubling your TFSA contribution requires more than picking a good stock. It requires patience and diversification. CGI’s beta of 0.85 indicates lower volatility compared to the broader market, making it a dependable cornerstone in a growth-focused portfolio. Combining CGI with other growth stocks or exchange-traded funds (ETF) can reduce risk while boosting your chances of hitting your goal.

To achieve compounding growth, reinvest any dividends or profits. While CGI’s dividend yield is modest at 0.38%, its potential for capital appreciation makes up for the lower yield. Holding such growth-oriented stocks for the long term allows you to take full advantage of the tax-free growth your TFSA offers.

Another factor to consider is CGI’s global reach and diversified client base. This shields it from regional economic downturns. With institutional investors holding nearly 71% of the float, CGI enjoys strong backing from seasoned professionals, a testament to its market credibility.

Finally, pairing CGI with complementary stocks in other industries ensures your portfolio remains resilient against sector-specific headwinds. The tech sector’s growth can be cyclical, but coupling it with defensive stocks or ETFs can help smooth returns over time.

Bottom line

Doubling a TFSA contribution is entirely feasible with the right blend of strategy, patience, and high-quality stocks like CGI. Its consistent financial performance, forward-looking strategy, and strong market position make it a cornerstone for growth-focused investors. Use your TFSA wisely, and watch your investments grow, tax-free, toward your goal.

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.

Fool contributor Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool recommends CGI. The Motley Fool has a disclosure policy.

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