Launched in 2009, the Tax-Free Savings Account (TFSA) has gained popularity among Canadian residents due to its tax-sheltered status. In 2025, the TFSA contribution room has increased by $7,000, bringing the cumulative contribution room to $102,000.
Income-seeking Canadians should consider buying and holding quality dividend growth stocks in the TFSA to benefit from a steady stream of passive income and long-term capital gains. One low-cost way to begin a recurring passive income stream is to invest in quality dividend stocks with a growing payout, significantly enhancing the effective yield over time.
Let’s see how you can transform your TFSA into a cash-gushing machine with just $20,000 in 2025.
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Hold this TSX dividend stock in a TFSA
Valued at a market cap of $1.2 billion, Bird Construction (TSX:BDT) is engaged in the construction sector, which is cyclical. In the last 10 years, Bird Construction has returned 188% to shareholders after adjusting for dividend reinvestments. However, the TSX stock also trades 34% below all-time highs, allowing you to buy the dip and benefit from outsized gains when market sentiment recovers.
In the third quarter (Q3) of 2024, Bird Construction’s revenue increased by 15% year over year, while adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) surged 42% compared to the same period in 2023.
It reported revenue of $898.9 million for Q3, with approximately 60% of growth coming organically. Further, the gross profit margin improved significantly to 11.4%, up from 9.3% in the prior year, driven by the company’s strategic focus on higher-margin sectors and disciplined project selection.
“Bird continues to build off its track record of sustainable growth, margin accretion and delivering strong shareholder returns,” said Terrance McKibbon, Bird’s chief executive officer. Notably, the TSX stock was recently honoured as a 2024 TSX30 winner, ranking seventh among top-performing companies on the Toronto Stock Exchange.
Bird’s combined backlog reached a record $7.9 billion at the end of September, with contracted work growing to $3.8 billion. The acquisition of Jacob Bros in August contributed approximately $360 million to the backlog.
Its adjusted EBITDA margin increased to 7.8% in Q3, up 1.5 percentage points from 6.3% in the same period last year. Moreover, net income rose to $36.2 million, or $0.66 per share, compared to $28.8 million, or $0.54 per share, in the year-ago period.
Bird maintained a strong liquidity position with $117 million in cash and cash equivalents and an additional $232 million available under its revolving credit facility.
Is the TSX stock undervalued?
Bird expects full-year 2024 revenues of approximately $3.4 billion with an adjusted EBITDA margin exceeding 6%. The company recently unveiled its 2025-2027 strategic plan, targeting 10% annual organic growth and an 8% adjusted EBITDA margin by 2027.
McKibbon emphasized that Bird is positioned to benefit from “significant tailwinds stemming from our strategic focus on margin accretion, disciplined project selection and safe, collaborative operational excellence.”
Bay Street forecasts Bird’s adjusted earnings per share to increase from $1.38 in 2023 to $2.72 in 2025. Comparatively, free cash flow is forecast to improve from $49 million in 2023 to $78.5 million in 2025.
Bird Construction pays shareholders an annual dividend of $0.84 per share, which translates to a forward yield of 3.9%. Given its outstanding share count, Bird Construction’s annual dividend expense is around $47 million, indicating a payout ratio of 60%. This gives the company enough room to increase its dividends over the next 12 months.
The Foolish takeaway
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY |
| Bird Construction | $21.56 | 928 | $0.21 | $195 | Quarterly |
Today, an investment of $20,000 in BDT stock would help you purchase 928 company shares and earn $780 in annual dividends. However, the TSX stock has more than doubled its dividend payout in the last five years, which is exceptional.
A $20,000 investment in BDT stock in February 2020 would have helped you purchase 3,568 company shares. This means that in 2020, you would have earned $1,387 in annual dividends, given its payout of $0.39 per share. Today, your annual dividend would be closer to $3,000, which indicates an effective yield of almost 15%.
Canadian investors should identify other such undervalued TSX dividend stocks and create a robust TFSA portfolio in 2025.
