Every announcement of the new Tax-Free Savings Account (TFSA) annual contribution limit motivates account holders to save and invest. In 2025, $7,000 is the limit, the same as in 2024, but the cumulative amount for those born before 1991 has expanded to $102,000.
Many TFSA users invest in dividend stocks to generate tax-free passive income. Based on the latest BMO Investment Survey results, utilization will increase as poll respondents plan to contribute more to their TFSA this year.
If you plan to max out your TFSA, Imperial Oil (TSX: IMO) is the ideal $7,000 dividend stock investment. In the 2024 TSX30 List (sixth edition), TSX’s flagship program showcasing the top 30 performing companies, it ranked 17. On May 12, 2025, the large-cap energy stock again breached the $100 mark. As of this writing, the share price is $101.36 (+15.3% year-to-date). Market analysts’ high price target in 12 months is $118, with a hold rating.
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Sound business model
Imperial Oil’s appeal as a solid investment stems from the industry experience of its management team and a sound business model. The $51.6 billion integrated energy producer is Canada’s largest petroleum refiner and 69.6% owned by Exxon Mobil. One of its winning strategies is leveraging the relationship with the American oil giant.
Its former Chairman and CEO, Brad Corson, said Imperial Oil possesses a unique resilience to potential negative effects of U.S. tariffs. However, he still maintains that avoiding restrictions on energy flow would be a “win-win” for Canada and the United States. Under the United States-Mexico-Canada Agreement (USMCA), there is duty-free trade on oil imports between the three countries.
Strong financials and a large-scale project
“Imperial delivered strong financial results in the first quarter, highlighting the resilience of our integrated business model,” said Corson. In the three quarters ending March 31, 2025, the top-line and bottom-line increased 1.9% and 7.8% year-over-year to $12.5 billion and $1.3 billion, respectively.
Cash flow from operating activities rose nearly 42% to $1.5 billion, while refinery capacity utilization reached 91%. Corson added, “The Upstream business continued to benefit from improved egress and narrower heavy oil differentials, while our Downstream profitability continued to reflect the structural advantages of the Canadian market.”
Meanwhile, a leadership change happened on May 8, 2025. IMO President John Whelan assumed the roles of Chairman and CEO in place of Corson, who retired.
In mid-2021, Imperial Oil announced the construction of a large-scale renewable diesel plant at its Strathcona refinery close to Edmonton, Alberta. The target completion date is Q2 2025, while operations will commence mid-2025. Its capacity will be approximately 20,000 barrels of renewable diesel daily, sourced from domestic-grown feedstocks.
Dividend stalwart
Imperial Oil is well-loved by long-term income investors. Besides the lengthy dividend track record of over 100 years, it has raised the annual dividend for 30 consecutive years. The incredible feat is a testament to its successful growth history and, more importantly, financial stability.
If you invest $7,000 in IMO today, the dividend yield is 2.9%. Your money transforms into $50.40 in tax-fee quarterly passive income in a TFSA. Given the low 27% payout ratio, the payouts should be safe.
