The Tax-Free Savings Account (TFSA) is your ticket to a cash-generating machine whose withdrawals need not be reported in your tax filing. How much cash it can generate depends on how efficiently you use this account.
Source: Getty Images
How to use $10,000 to transform your TFSA into a cash-generating machine
Your TFSA cash machine can be a mixture of growth and dividend stocks that have the potential to give large amounts occasionally and small amounts regularly.
Growth stocks
Two Canadian tech stocks with significant exposure to the United States, Descartes Systems (TSX:DSG) and HIVE Digital Technologies (TSXV:HIVE), have dipped sharply. Now is the time to invest in them and book a slot in their recovery rally.
Supply chain solutions provider Descartes Systems has dipped 30% throughout the year due to the tariff war. However, the company continued to report strong revenue growth in the first half of 2025. It’s zero debt and a 45% Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) margin could help it withstand the slowdown in trade. Descartes earns the majority of its revenue from the United States. Descartes could see a recovery as tariffs normalize and the global supply chain undergoes a structural shift. The stock reported a similar trend in the 2018 US-China trade war when it rode the recovery rally in the first half of 2019.
HIVE Digital Technologies’ stock has halved from its October high of $9.85 as the Bitcoin price fell 33% after the US government shutdown. Bitcoin miners are using this opportunity to accumulate Bitcoins. Now, you can’t buy Bitcoins through the TFSA, but you can accumulate shares of HIVE that trade on well-recognized public exchanges. It will give you exposure to Bitcoin prices as well as artificial intelligence (AI) adoption, with its BUZZ high-performance computing (HPC) cloud.
Buying the above stocks at their dip can help you generate cash during the economic recovery. The growth in share price will increase capital appreciation, for which you pay no tax.
Dividend stocks
Growth stocks create an opportunity to generate wealth but also carry high risks. Invest only that money you are willing to lose in growth stocks. In the meantime, you can diversify your TFSA portfolio to include dividend growth stocks where a payout is assured, and the only risk is the fluctuating dividend growth rate.
CT REIT (TSX:CRT.UN) and Canadian Natural Resources (TSX:CNQ) have a long history of growing dividends even in a crisis. Behind this resilience is their strong capital structure and mining-free cash flow. It’s unlikely that they do not face risk. CT REIT’s biggest advantage and risk is that over 90% of rental revenue comes from its parent, Canadian Tire. The REIT gets assured occupancy for every shop it acquires and develops. It has systematically increased its funds from operations with new store rents and lowered its payout ratio even after increasing dividends by an average annual rate of 3%.
Canadian Natural Resources has both advantages and risks of owning the second-largest oil sands field in the world. Its business is exposed to oil price fluctuations. However, the company has diversified its portfolio to include Synthetic Crude that it sells at a premium. It adjusts its production according to the oil price.
When the oil price is low, the capital spending on production is channelled towards reducing debt and buying back shares. This helps it keep growing its dividend every year, even during the 2016 oil crisis.
These two stocks can give a fixed monthly and quarterly payout, respectively, and reduce the overall portfolio risk.
How to allocate $10,000 in your TFSA
You can divide the $10,000 amount equally among the four stocks for a risk-reward balance. However, if you have the appetite to take a little risk, you can allocate $7,000 in the above two growth stocks and the remaining $3,000 in dividend stocks. You can also use the dividend amount for opportunistic investments. Consider buying Shopify and Air Canada at their March seasonal dip and selling them at their seasonal peak of February and July, respectively.
