House prices continue to be sky-high these days, as the costs of building homes rising and housing starts falling in return. It can feel tough for Canadians to build real wealth with such high costs. But don’t worry, there are other ways! One smart strategy is using your Tax-Free Savings Account (TFSA) to invest in reliable stocks that pay dividends. If you keep reinvesting those dividends, your money can really grow over time, even as housing prices rise. Let’s see how a $20,000 investment in the Bank of Montreal (TSX: BMO) could potentially grow to over $200,000, even with those crazy housing costs.
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The stock
BMO is one of Canada’s big banks. It offers all sorts of banking and financial services. As of writing, BMO stock trades around $129 a share. This bank has a long history of paying dividends. Just recently, it announced a quarterly dividend of $1.59 per share, bringing its annual dividend to $6.36. This steady dividend yield makes BMO a pretty attractive option if you’re looking for both income and growth from your investments.
Let’s say you were to invest that $20,000 into BMO stock. Then, your returns over the next 15 years continue to grow at the compound annual growth rate (CAGR) of the last five years of 14%, alongside the dividend CAGR of 8.5%. Here’s how that might shake out.
| Year | Share Price | Shares Owned | Share Value | Annual Dividend Per Share | Annual Dividend | New Balance |
| 1 | $129.00 | 155.00 | $20,000.00 | $6.36 | $985.80 | $23,614.74 |
| 2 | $145.77 | 162.00 | $23,614.74 | $6.90 | $1,117.80 | $27,837.68 |
| 3 | $164.72 | 169.00 | $27,837.68 | $7.48 | $1,264.12 | $32,758.88 |
| 4 | $186.13 | 176.00 | $32,758.88 | $8.11 | $1,427.36 | $38,490.39 |
| 5 | $210.33 | 183.00 | $38,490.39 | $8.80 | $1,610.40 | $45,157.30 |
| 6 | $237.67 | 190.00 | $45,157.30 | $9.54 | $1,812.60 | $52,908.29 |
| 7 | $268.57 | 197.00 | $52,908.29 | $10.35 | $2,038.95 | $61,909.92 |
| 8 | $303.48 | 204.00 | $61,909.92 | $11.22 | $2,288.88 | $72,358.23 |
| 9 | $342.93 | 211.00 | $72,358.23 | $12.17 | $2,567.87 | $84,477.18 |
| 10 | $387.51 | 218.00 | $84,477.18 | $13.20 | $2,877.60 | $98,525.25 |
| 11 | $437.89 | 225.00 | $98,525.25 | $14.32 | $3,222.00 | $114,798.24 |
| 12 | $494.82 | 232.00 | $114,798.24 | $15.53 | $3,602.96 | $133,077.70 |
| 13 | $559.15 | 238.00 | $133,077.70 | $16.84 | $4,007.92 | $154,168.96 |
| 14 | $631.84 | 244.00 | $154,168.96 | $18.26 | $4,455.44 | $178,495.00 |
| 15 | $713.98 | 250.00 | $178,495.00 | $19.80 | $4,950.00 | $206,540.80 |
Keep in mind that this is just a projection based on how things have been in the past and assumes those dividends and that average stock growth continue. Past performance isn’t a guarantee of the future, but BMO’s long history does suggest a certain level of reliability.
A winning pair
Now, the TFSA is super important in this plan. Introduced in 2009, the TFSA lets Canadians earn investment income without paying any taxes on it. That includes dividends and any profit you make when you sell your investments. This tax-free growth is what really helps that compounding effect work its magic over time. By using your TFSA, you get to keep all the returns without the taxman taking a cut!
BMO’s recent financial results also look like a good match up with a TFSA. In the first three months of 2025, the bank reported earnings per share (EPS) of $2.83. That’s an increase from $1.73 during the same period the year before! This growth shows that the bank is doing well in its operations and is able to make consistent profits. That’s good news because it supports the ability to keep paying those dividends and maybe even increase them in the future.
Bottom line
While the idea of turning $20,000 into over $200,000 is pretty exciting, it’s important to be realistic about investing. You should always have a clear idea of your financial goals and how much risk you’re comfortable taking. Spreading your investments around in different companies and industries, checking your investments regularly, and staying informed about what’s happening in the market are all part of being a successful investor. It’s also a good idea to chat with a financial advisor. They can give you personalized advice that fits your specific situation.
So, even with those high housing costs, there are still ways for Canadians to build significant wealth through smart investing. By taking advantage of the TFSA and investing in stable, dividend-paying stocks like BMO, you could potentially see some impressive financial growth over the long haul. Just remember that patience, sticking to your plan, and having a long-term perspective are key to making it work!
