How to Use Your TFSA to Turn a $7,000 Contribution Into $545 a Year

Investing in high-quality dividend stocks is an effective way to generate steady passive income while also benefiting from long-term capital appreciation. Holding these investments in a Tax-Free Savings Account (TFSA) can further enhance returns, as eligible dividend income and capital gains grow tax-free. For 2026, the Canada Revenue Agency has maintained the TFSA annual contribution limit at $7,000.

By splitting this investment amount equally among the following two dividend stocks, investors can generate more than $545 in annual dividend income while benefiting from long-term growth potential. Let’s take a closer look at these stocks.

Telus

After facing pressure over the past couple of years, Telus (TSX: T) has staged a strong recovery, with its share price rising more than 11% from this month’s low. Improved investor sentiment toward North American telecom stocks, combined with Telus’s attractive valuation, appears to have fuelled the recent rally. Even after these gains, the stock still offers a compelling forward dividend yield of 10.69%.

The long-term outlook also remains favourable. The growing demand for telecommunications services, driven by automation, remote work and learning, artificial intelligence, and the continued expansion of e-commerce, is creating significant growth opportunities. To capitalize on these trends, Telus plans to invest approximately $66 billion through the end of the decade to expand its 5G and broadband infrastructure. These investments should support customer growth, increase average revenue per user (ARPU), and strengthen its competitive position. The company also expects revenue from its AI-enabled products and services to grow at an annualized rate of around 30% through 2028, reaching $2 billion.

At the same time, Telus continues to strengthen its balance sheet. It reduced its net debt-to-EBITDA (earnings before interest, taxes, depreciation, and amortization) ratio to 3.5 times at the end of the first quarter, down from 3.9 times a year earlier, and expects to lower it further to 3.3 times by year-end. Backed by resilient cash flows, an improving financial position, an attractive dividend yield, and solid long-term growth prospects, Telus appears well-positioned to deliver strong total returns, making it a compelling choice for income-focused investors.

Enbridge

Enbridge (TSX: ENB) is another high-quality dividend stock that stands out for income-focused investors, thanks to its resilient business model, predictable cash flows, and attractive yield. It earns approximately 98% of its income from regulated assets and long-term take-or-pay contracts, and around 80% of that income is protected from rising input costs through inflation-indexed mechanisms. This stability has enabled Enbridge to pay dividends uninterrupted for more than 70 years and increase its payout for 31 consecutive years. The stock currently offers an attractive forward dividend yield of 5%.

The long-term outlook also remains encouraging. Rising oil and natural gas production and consumption across North America continue to drive demand for energy infrastructure, creating significant growth opportunities for Enbridge. To capitalize on this trend, the company has identified a $50 billion project pipeline and plans to invest $10-$11 billion annually to advance these opportunities. Supported by these investments, management expects adjusted earnings per share and distributable cash flow per share to grow at a compounded annual growth rate of 5% through the end of the decade.

With its visible growth pipeline and resilient cash flow generation, Enbridge plans to return $40-$45 billion to shareholders over the next five years, underscoring its confidence in sustaining dividend growth. Backed by its defensive business model, disciplined capital investment strategy, and long track record of rewarding shareholders, Enbridge remains an excellent choice for investors seeking reliable and growing passive income.