Transform Your TFSA Into a Cash-Gushing Machine With Just $20,000

Launched in 2009, the Tax-Free Savings Account (TFSA) is a popular registered account in Canada. Its tax-sheltered status makes the TFSA an ideal account for Canadians to buy and hold quality dividend stocks with a growing payout. In addition to a steady stream of passive income, long-term investors are positioned to benefit from capital gains, both exempt from Canada Revenue Agency taxes.

In 2025, the maximum cumulative contribution room for TFSA holders has risen to $102,000. So, income-seeking investors could consider allocating $20,000 towards fundamentally strong TSX dividend stocks such as High Liner Foods (TSX: HLF). Valued at a market cap of $487 million, High Liner stock has returned 194% to shareholders in the last five years. If we adjust for dividend reinvestments, cumulative returns are much closer to 250%. Despite these outsized gains, the TSX stock currently offers a forward dividend yield of over 4%. Let’s see if you should own the small-cap stock right now.

Is the TSX dividend stock a good buy?

High Liner Foods delivered a strong finish to 2024, with volume growth and improved profitability despite persistent market headwinds. The seafood processor reported a 1.3% increase in sales volume to 60.4 million pounds and an 8.7% rise in adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) to $23.8 million for the fourth quarter.

“Our strategy is working, we are executing well, and the momentum across our business continues,” said Chief Executive Officer Paul Jewer during the last earnings call. This performance marks the successful execution of High Liner’s key objectives for 2024, which included growing volume profitably, increasing adjusted EBITDA, maintaining strong free cash flow, and effectively responding to competitive market conditions.

While sales decreased by 0.9% to $235 million due to reduced pricing reflecting deflationary raw material costs and increased promotional activity, gross profit increased by 4.7% to $51 million. Gross profit margin expanded by 120 basis points to 21.7% compared to the same period last year, demonstrating the company’s ability to balance pricing strategies with profitability goals.

HLF’s retail business showed particular strength, with expanded distribution in the growing club channel. High Liner’s premium C.Wirthy Atlantic salmon brand remained one of the fastest-growing brands in the U.S. retail category. In contrast, its value-oriented Fisher Boy brand performed well in discount and value channels.

Foodservice, the largest segment of High Liner’s business, saw flat volume amid industry-wide challenges as consumers pulled back on dining out. High Liner leveraged its diverse portfolio, including alternative species and value-added products, to provide solutions to foodservice operators facing cost pressures.

Financial flexibility remains a key strength for High Liner, with net debt decreasing by $16.7 million to $233.2 million compared to year-end 2023. The company’s net debt to adjusted EBITDA ratio improved to 2.3 times, below its long-term target of three times.

Is the TSX stock undervalued?

Looking ahead to 2025, High Liner faces headwinds, including consumer pullback on dining out and potential inflationary impacts from tariffs. HLF continues to invest in its future, committing $16 million to strategic investments in Norwegian aquaculture companies Norcod and Andfjord to reinforce its position in sustainable seafood procurement.

With strong cash flow and a solid balance sheet, High Liner remains well-positioned to pursue organic growth and strategic merger and acquisition opportunities.

Analysts expect High Liner to increase sales from $959 million in 2024 to $1.08 billion in 2026. Comparatively, adjusted earnings are forecast to expand from $1.51 per share in 2024 to $1.79 per share in 2026. Moreover, its free cash flow stood at $66.8 million in 2024.

So, priced at 11 times trailing earnings and 6.8 times trailing FCF, High Liner stock is relatively cheap. The company’s annual dividend expense is around $20 million, indicating a payout ratio of 33%. In the last five years, High Liner has more than tripled its dividend payout, significantly enhancing the yield at cost.

An investment of $20,000 in High Liner stock would help you buy 1,210 company shares and earn $206 in quarterly dividends. Canadians should identify other such dividend growth stocks and create a diversified portfolio that lowers overall risk.