Every investment instrument has a purpose, and the way you use it determines the returns you can get. Merely replicating one’s portfolio may not give you the same returns. While choosing the right stock is important, how and when you invest in it, and which medium you choose can make a world of difference in the returns. The Tax-Free Savings Account (TFSA) is a perfect instrument for high-growth and high-yield stocks. You could consider investing in a few risky stocks that have the potential to double your money.
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The rebalancing of growth and dividends in a TFSA
Consider selling your growth stock through the TFSA, instead of withdrawing that money, and reinvest it in dividend stocks. If not withdrawn, the reinvestment will be tax-free and will not affect your TFSA contribution room.
One TFSA strategy is rebalancing. Many mutual funds use it. They determine an allocation. For instance, 30% in growth, 30% in dividends, 20% in gold, and 20% in ETFs. They review the asset allocation quarterly or half-yearly and rebalance it. When the share price grows, the value of a particular asset increases. This increases its portfolio weightage. Shares worth the surplus amount are sold and reinvested in other segments, rebalancing the allocation.
The perfect TFSA stocks for a rebalancing strategy
If you have been studying Shopify’s (TSX:SHOP) stock price, the stock tends to dip in March and rally in the December-to-February period. Suppose you invested $10,000 in Shopify in the March 2025 dip at $109, so you own 91 shares. The value of these shares is now above $21,000. You can sell shares worth $11,000 and invest them in a stable, high-yield dividend stock like RioCan REIT (TSX:REI.UN).
When Shopify’s share price falls in March, you would have already withdrawn your gain and converted it into a monthly payout. Meanwhile, $10,000 will remain invested in Shopify and generate returns in the next seasonal rally.
Now, you need to be assured that another rally is ahead. That is possible as Shopify is expanding its flywheel model in new geographies while generating profits. It has successfully remained profitable for nine consecutive quarters, and there are no major hurdles in the flywheel.
The 6.2% annual yield stock that pays cash every single month
Now for the dividend angle. The yield is the annual dividend per share as a percentage of the share price. RioCan REIT has been growing its dividend annually between 3% and 5% after slashing its dividend in 2020. However, the stock continues to trade below the pre-pandemic level. The pandemic changed the world for RioCan, which has a diversified tenant base with no single tenant accounting for more than 5% of rental income.
The REIT struggled to increase dividends in the pre-pandemic era, as the payout ratio was high. However, it slashed dividends by a third in December 2020, which reduced its payout ratio to 50–60%. It has maintained this ratio since then, but the dividend per unit is still below the pre-pandemic level.
| Year | Dividend per Share | YoY Growth |
| 2025 | $1.154 | 4.2% |
| 2024 | $1.108 | 3.0% |
| 2023 | $1.075 | 5.9% |
| 2022 | $1.015 | 5.7% |
| 2021 | $0.960 | -33.3% |
| 2020 | $1.440 | 0.0% |
| 2019 | $1.440 | 0.0% |
| 2018 | $1.440 | 2.1% |
| 2017 | $1.410 | 0.0% |
| 2016 | $1.410 | 0.0% |
| 2015 | $1.410 | 0.0% |
| 2014 | $1.410 | 0.0% |
| 2013 | $1.410 | 2.2% |
| 2012 | $1.380 | 0.0% |
| 2011 | $1.380 | 0.0% |
Now those who invested in RioCan before the pandemic are in the red, while those who invested after the pandemic are in the green.
RioCan’s management is now looking to recycle $1.3 to $1.4 billion worth of capital in the next three years by selling low-rent properties to buy high-rent properties. It plans to increase funds from operations (FFO) per unit at a compounded annual growth rate (CAGR) of 3.5%, which means dividends could continue to grow.
Investor takeaway
Booking profits from Shopify and investing in RioCan can help you lock in more than a 6% yield, which grows with inflation and pays every single month. The payout can be reinvested to buy more dividend stocks or some opportunistic stocks. Such reinvestment can help you build a perfect TFSA that generates optimal tax-free returns.
