The first contribution limit of the Tax-Free Savings Account was $5,000. Fast-forward to the present, and the total cumulative contribution room for anyone eligible since 2009 but who has never contributed has ballooned to $109,000. The TFSA is a fantastic account because it begins your journey to real wealth when you use it to save and invest.
By now, TFSA users who have contributed early and maximized the yearly limits must have a fortune. If you desire to power your TFSA to a tax-free fortune of $100,000, invest in Canadian Natural Resources (TSX:CNQ) and Canadian Utilities (TSX:CU). Both dividend-growth stocks are ideal investments to maximize your returns.
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Dividend aristocrat
Canadian Natural Resources is an energy major in Canada. The $91.14 billion oil & natural gas company has raised dividends annually for 26 consecutive years. At $43.13 per share, the dividend offer is 4.96%. Consistent dividend increases are why CNQ is suitable for income-focused TFSA investors.
A strategic expansion is underway following the acquisition of Chevron Canada’s Alberta assets last year. The projected production from the assets, including Duvernay and the Athabasca Oil Sands Project, in 2025 is approximately 122,500 barrels of oil equivalent per day (boe/d). Moreover, the assets are expected to generate immediate free cash flow (FCF).
The short-term challenges are fluctuating oil prices and a potential U.S. tariff on energy imports from Canada. Nonetheless, management said the tariff threat will not hinder CNRL’s planned production hike in 2025. Canada’s largest oil & gas producer expects the Chevron assets to significantly contribute to the anticipated 12% year-over-year production growth to between 1.51 million and 1.56 million boe/d.
Also, through the Pathway Alliance consortium of major oilsands producers, CNRL plans to spend $90 million this year on engineering work for the carbon capture and storage projects. Its president, Scott Stauth, said, “We’re progressing these carbon capture projects from an engineering perspective for 2025.”
Regarding tariffs, Stuath said it is difficult to assess the risks unless you have the details or certainty. “We have built ourselves a resilient business here that is sustainable to take the ups and downs. We saw those ups and downs happen through COVID, and if we happen to see that happen this coming year here, then we’ll be prepared,” he added.
Dividend King
Canadian Utilities is a no-brainer buy. The utility stock is TSX’s first Dividend King. A company with 50 consecutive years of dividend increases wears the crown. This $9.29 billion utility and energy infrastructure company’s dividend-growth streak is now 52 years.
Besides the incredible dividend-growth track record, CU’s high-quality earnings base is growing. Its highly contracted and regulated earnings base is the foundation for continued dividend growth.
According to management, the $4.6 to $5 billion investment in regulated utilities from 2024 to 2026 would contribute significant earnings and cash flows. If you invest today ($34.20 per share), the dividend yield is 5.27%.
Power of compounding
Given the average 5.115% dividend yield of CNQ and CU, a $38,500 investment (equivalent to 5.5 times the $7,000 2025 TFSA yearly limit) will compound to more than $100,000 in 20 years.
