Turning a Tax-Free Savings Account (TFSA) into a reliable cash generator does not require six figures. Even a well-chosen $10,000 invested in the right dividend stocks could start producing healthy tax-free income while giving your money room to grow over time. Companies with steady cash flow, reliable dividends, and opportunities for future growth can provide a solid foundation for a TFSA.
In this article, I’ll highlight two TFSA-friendly dividend stocks that you can consider buying now. One owns critical pipeline infrastructure with durable cash flow, while the other runs a diversified chemicals business that is still expanding. In addition, both offer attractive yields right now. Let’s take a closer look.
Source: Getty Images
South Bow stock
The first stock that can help turn a $10,000 TFSA into a steady cash generator is South Bow (TSX:SOBO). As an energy infrastructure company, it owns and operates key liquids pipelines and facilities across Canada and the United States.
At the time of writing, SOBO stock traded at $49.04 per share with a market capitalization of about $10.2 billion. Its shares have climbed roughly 39% over the last year and currently offer a dividend yield of about 5.8%.
Despite fluctuations in the energy markets of late, South Bow’s latest results showed why long-term investors love this stock. In the first quarter, the company’s net income reached US$77 million, helped by stronger marketing contributions and the successful launch of its Blackrod Connection Project. For the quarter, it also generated US$491 million in revenue, US$257 million in EBITDA (earnings before interest, taxes, depreciation, and amortization), and US$168 million in distributable cash flow.
There is also a long growth runway for South Bow. Its Prairie Connector recently secured 20-year binding commitments, while management continues prioritizing a sustainable base dividend and an investment-grade balance sheet. That mix of dependable infrastructure and visible expansion makes South Bow a great dividend stock to invest in right now.
Chemtrade stock
The next stock that could add another layer of income to a cash-generating TFSA is Chemtrade Logistics Income Fund (TSX:CHE.UN). It operates across industrial chemicals, water solutions, and services, which gives it a broader set of revenue drivers than a pure commodity business.
Following a 44% run over the last year, its stock currently trades at $15.97 per unit with a market cap of $1.8 billion. At this market price, it also offers a dividend yield of around 4.5%.
In its latest quarter (ended in March), Chemtrade’s revenue rose 7.9% year-over-year to $503 million, helped by the Polytec acquisition and stronger pricing for merchant acid and sulphur products. For the quarter, its adjusted EBITDA was $113.5 million, while Chemtrade maintained net debt of $1.2 billion and a net debt-to-last-12-month adjusted EBITDA ratio of 2.5 times.
Recently, Chemtrade also lifted its monthly distribution by 4% to $0.06 per share and continues working toward its Vision 2030 target of $550 million to $600 million in mid-cycle adjusted EBITDA. This simply means investors are collecting income today while the business keeps building value over time. These are some of the key reasons why this dividend payer still looks appealing in July.
