The functionality of the Tax-Free Savings Account (TFSA) is so much more than that of a typical savings account. There are numerous advantages to TFSA users but the biggest of all is tax-free money growth. Since there’s no income level requirement, Canadians 18 years old and above with a valid Social Insurance Number (SIN) can open this super versatile investment account.
Cash offers instant liquidity for emergencies although it is not an ideal holding in a TFSA. Instead, hold income-producing assets like bonds, government investment certificates (GICs), exchange-traded funds (ETFs), mutual funds, and stocks to maximize the tax-free money growth feature.
Most TFSA investors choose stocks over other eligible investments because of potentially higher returns from capital gains and dividend income. If you’re using your available contribution room this month, Whitecap Resources (TSX: WCP) and Mandalay Resources (TSX: MND) are the top choices.
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Dividend play
Whitecap Resources trades at a discount (-10.6% year-to-date), although the dividend more than compensates for the temporary weakness. At $9.01 per share, the dividend yield is a juicy 8.2%. Since the payout frequency is monthly, a $7,000 position transforms into $143.85 in monthly passive income.
The $5.2 billion oil and liquids-weighted growth company announced a merger ($15 billion all-cash transaction) with Veren, another oil producer. Whitecap will become Canada’s seventh-largest oil and gas producer and the country’s leading light oil and condensate producer when the deal closes by May 30, 2025.
Capital gains
Mandalay Resources flies under the radar. At only $5.49 per share, the trailing one-year price return is 266%-plus. Had you invested $7,000 a year ago, your money would be $25,620 today. The $510.9 million Canadian resource company has producing assets or gold mines: Costerfield in Australia (plus antimony) and Björkdal in Sweden.
Investors have turned to the mining sector (+20.7% year-to-date) because of the prevailing trade policy and economic uncertainties. Mandalay is a sound investment choice and isn’t riding on this trend. The record financial performance in 2024, including the impressive cash flow growth, is why this gold stock is a “strong buy.”
In the 12 months ending December 31, 2024, revenue climbed 39% to $240.6 million versus 2023, the highest annual revenue for the company. Consolidated net income soared 508% year-over-year to $47.7 million, while free cash flow (FCF) from the two core mines reached a record $69 million.
Besides favourable metal prices, Mandalay achieved its production (54,805 oz) and cost guidance last year due to disciplined cost management and operational efficiencies. According to its President and CEO, Frazer Bourchier, 2024 was a milestone year for Mandalay.
“With a strong cash position, zero debt, and an ongoing commitment to sustainable cash generation, we enter 2025 well-prepared to capitalize on strategic opportunities and drive long-term value creation,” Bourchier added.
Mandalay forecasts annual production of 85,000 to 95,000 gold equivalent ounces in 2025. The company plans to continue investing $43 to $48 million in major projects in Costerfield and Björkdal.
Save and invest for the future
The TFSA is a powerful vehicle even for lower-income households to save and invest for the future. Don’t worry about not meeting the annual limit. The unused amount rolls into the next year and is added to the new contribution limit.
