If you are not maximizing your tax-free savings account (TFSA) contributions, it might be a good idea to reconsider. Anytime there’s an investment vehicle that offers tax savings, I suggest making it a top priority to maximize your investment in it in order to take advantage of every bit of savings that are offered. It’s hard to make money, so don’t throw away an opportunity like this.
Here are three stocks to buy in order to maximize your TFSA tax savings.
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CGI
While CGI Inc. (TSX: GIB.A) pays only a small dividend, this tech stock offers so much more than that to investors. In fact, as you can see from the graph below, CGI stock has appreciated significantly over the last 15 years.
In your TFSA, all of these capital gains are tax-sheltered. This means that if you invested $10,000 in CGI stock 15 years ago, it would be worth $118,000 today. That’s a $107,000 gain that would go straight into your pocket – no taxes paid.
Today, I still think that CGI makes a great candidate for a TFSA. This is because the company has plenty of room left to grow. Its mission is to continue to consolidate the IT services market. Luckily, the company has two things on its side – the fact that the industry continues to expand, and the fact that CGI has great expertise in making and integrating acquisitions.
With rapidly expanding cash flow generation and a healthy balance sheet, CGI finally initiated a dividend recently for the first time ever. So now TFSA investors will benefit from tax-free dividend income from CGI, as well as what I think will be continued solid capital gains.
Enbridge: A high yield dividend stock for tax-free TFSA income
As a high yielding dividend stock, Enbridge Inc. (TSX: ENB) has a clear place in any TFSA today. Its current yield of 5.8%, coupled with the company’s strong future prospects, means that Enbridge stock is set to deliver solid returns for its shareholders. And may I remind you, these returns will be tax-free if you hold it in your TFSA.
Enbridge’s cash flow and therefore its dividend is highly predictable and secure. This is because the company’s recent acquisition of three U.S. utilities, which provide it with additional regulated revenue.
On top of this, Enbridge has exposure to growth as well. For example, natural gas demand is increasing significantly as global demand for liquified natural gas is strong, electric power demand is rising, and coal switching continues.
Tourmaline: Dividends plus capital gains
Tourmaline Oil Corp. (TSX: TOU) is Canada’s largest natural gas producer. Also, it’s one of Canada’s top dividend stocks, with a current dividend yield of 2% and numerous special dividends paid out in the last four years – all tax-free in your TFSA.
In fact, in the last four years, Tourmaline paid out $15.25 per share in special dividends. This is over and above the regular dividend. So last year, for example, Tourmaline paid out $2 in special dividends, for a total dividend yield of 5% (based on today’s price). In 2023, the company paid out $5.50 in special dividends, for a total dividend yield of 10%.
My point here is that with Tourmaline, shareholders are receiving significant dividends. Natural gas fundamentals are positive and Tourmaline is a leading operator, so I think we can expect more of the same from Tourmaline going forward. All considered, Tourmaline is another opportunity to maximize your tax-free savings account returns.
