Canadians can get the most from their Tax-Free Savings Account (TFSA) in 2025 by focusing on a passive-income strategy. While the stock market is in turmoil because of trade tensions, many TSX dividend stocks remain dependable sources of investment income.
The TFSA was created in 2009 to help Canadians save for retirement or meet short- and long-term financial goals. Users can earn a $250 tax-free monthly income by maximizing the annual contribution limits.
Whitecap Resources (TSX:WCP) is a suitable option using the passive-income strategy. Besides the high yield, this top-tier energy stock pays monthly cash dividends. At $8.02 per share, the dividend offer is 8.93%.
The key to achieving your financial target is reinvesting the dividends (12 times a year) for faster compounding of your TFSA balance. Assuming the yield is constant, you’d start receiving $250 in tax-free income every month after 4.8 years of contributions ($7,000 yearly).
Long-term investment
Whitecap Resources is currently undervalued (-19.87% year to date) but well-positioned for long-term growth. It ranks high in my book in terms of value and dividend. The strong first-quarter (Q1) 2025 financial results reinforce market analysts’ buy rating. Their 12-month average price target is $12.75 (+58.8%).
This $4.8 billion oil and liquids-weighted growth company is laser-focused on profitable production growth and sustainable dividends. In a message to shareholders, management said Whitecap Resources is off to an excellent start in 2025. The first quarter highlights include higher production and strong funds flow.
Latest financial results
In the three months ending March 31, 2025, total revenue (petroleum and natural gas) and funds flow increased 8.5% and 16% year over year to $942.2 million and $446.3 million. Notably, net income climbed nearly 172% to $162.6 million versus Q1 2024. Furthermore, free funds flow reached $48.2 million from -$9.2 million a year ago, while net debt dropped 34% year over year to $986.9 million.
The long-term organic production growth target is 3% to 5%. However, Whitecap can adjust its production growth rate to prioritize free funds flow generation.
Strategic acquisition
On March 10, 2025, Whitecap announced an approximately $15 billion transaction to acquire Veren, an oil and gas company. The deal should close on or before May 12 this year, and the combined asset base will make Whitecap the largest landholder in the liquids-rich Montney and Duvernay.
Its president and chief executive officer, Grant Fagerheim, said, “We are excited to bring together two exceptionally strong asset bases to create one world-class energy producer.” Because of enhanced scale, deep inventory in Montney and Duvernay, and increased free funds flow generation, Whitecap boasts a business with a differentiated competitive advantage.
Upon closing the transaction, Whitecap expects to capture and realize annual synergies of over $200 million, independent of commodity prices. In addition to supply chain efficiencies, there would be meaningful savings from capital and corporate synergies.
Clear pathway
Whitecap assures that the annual dividend will continue in a post-Veren deal now that there’s a clear, promising path to long-term growth and value creation. The generous yield and consistent monthly cash dividends are favourable to TFSA investors. Significant capital appreciation is on the horizon should the stock break out.
