How I’d Use $7,000 to Transform My TFSA Into a Cash-Generating Machine

With the Tax-Free Savings Account (TFSA) contribution limit for 2025 set at $7,000, investors can maximize their investment potential by focusing on high-yield dividend stocks. These stocks can effectively turn a TFSA into a cash-generating machine. By selecting companies known for their strong fundamentals and resilient yields, investors can secure reliable income for years to come.

Against this background, here are two Canadian stocks offering high yields to enhance the portfolio’s income-generating capacity.

TFSA stock #1

Enbridge (TSX:ENB) is one of the top TSX dividend stocks to add to your TFSA to generate consistent cash. Its resilient business model, growing earnings base, and robust distributable cash flows (DCF) enable it to offer solid dividend distributions.

It is worth noting that this integrated energy infrastructure company has paid dividends for 70 years and raised them for 30 consecutive years. Enbridge also maintains a sustainable payout ratio of 60-70% of its DCF, which indicates that its dividend is durable. Moreover, ENB stock offers a secured dividend yield of 5.9%.

The energy transportation company is well-positioned to continue to deliver higher payouts thanks to its ability to generate robust earnings. Its diversified assets, long-term contracts, high system utilization, and minimal exposure to commodity price fluctuations position it well to generate steady earnings and DCF, supporting its future payouts.

Over the long term, Enbridge’s management forecasts its earnings and DCF per share to increase by about 5% each year. This growth will enable the company to distribute higher dividends in the future. Management targets a mid-single-digit annual dividend-growth rate, which is in line with DCF expansion.

TFSA stock #2

Another stock that could transform your TFSA into a cash-creating machine is telecom giant Telus (TSX:T). Canada’s leading wireless service provider has a stellar dividend growth history and offers a high yield of 7.6%. Moreover, its dividend payout ratio is 60-75% of free cash flow, which is sustainable in the long run.

It is worth noting that it has raised its dividend 27 times since 2011 and returned more than $21 billion in dividends to its shareholders since 2004. Thanks to its growing earnings base and sustainable payout ratio, Telus looks well-positioned to reinvest in growth initiatives and raise dividends in the future. The company could target annual dividend growth of 7-10%, which is in line with its dividend-growth program.

The telecom company will continue to benefit from its high-quality asset base. Moreover, investments in infrastructure and a focus on enhancing coverage and reliability of its network through spectrum acquisitions and infrastructure upgrades bode well for growth. Further, it has diversified its revenue base, which adds stability and generates incremental sales. In addition, Telus’s ability to expand its user base profitably, maintain a lower churn rate, and improve its costs will drive earnings, supporting future payouts.

Earn $469 in tax-free passive income

Enbridge and Telus have solid fundamentals and strong histories of dividend growth and offer high and resilient yields, making them excellent options for generating steady, tax-free passive income.

As shown in the table, investing $7,000 equally in both these stocks could earn you about $469 in tax-free income each year.