A Tax-Free Savings Account (TFSA) can become a six-figure portfolio, a retirement-income machine, or one very satisfying tax-free nest egg. Unfortunately, the CRA has yet to introduce the feature where it funds itself while we’re sleeping. Someone still has to invest the money.
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Getting started
For a first $7,000, I wouldn’t chase the stock most likely to double by Christmas. I’d rather start with a business sturdy enough to survive ugly markets, capable of increasing earnings over time, and boring enough that I won’t feel compelled to check the share price during breakfast.
That’s especially important inside a TFSA, where the biggest advantage comes from giving investments years to compound without tax taking a slice along the way. The 2026 TFSA dollar limit is $7,000. Unused contribution room carries forward, while withdrawals generally return as new room the following calendar year. Your actual available room can therefore be higher or lower depending on previous activity, so it’s worth checking personal records before contributing.
Once that’s done, I’d put Intact Financial (TSX: IFC) near the top of my starter-stock list.
IFC
IFC is Canada’s largest property-and-casualty insurer, with operations extending into the United States, United Kingdom, and Ireland. Its customers pay premiums for home, auto, and commercial insurance. Intact can earn money by pricing those policies profitably and investing the premiums it collects before claims need to be paid.
That gives the company multiple ways to grow. Insurance also isn’t particularly optional. Drivers need coverage, homeowners and businesses need protection. That recurring demand gives Intact the sort of defensive foundation I want inside a TFSA. Recent results also show why I think today’s weaker share price creates an interesting entry point.
Into earnings
IFC’s second quarter wasn’t pretty at first glance. Catastrophe and unusually large losses came in $247 million above expectations, knocking $1.08 per share from net operating income. Net operating income (NOI) per share consequently fell 39% year over year.
Yet underneath those losses, the company remained remarkably healthy. Operating premiums written increased 4%, while operating return on equity reached 17%, up from 16.3% a year earlier. Book value per share also increased 13% year over year to $111.73.
IFC finished Q2 with a $3.8 billion capital margin and spent $181 million repurchasing its own shares. Management continues targeting roughly 10% annual growth in NOI per share over time.
Earning income
IFC stock recently traded around $267, well below its 52-week high above $305. At that price, $7,000 would purchase 26 full shares.
| COMPANY | RECENT PRICE | NUMBER OF SHARES | ANNUAL DIVIDEND | ANNUAL TOTAL PAYOUT | FREQUENCY | TOTAL INVESTMENT |
|---|---|---|---|---|---|---|
| IFC | $267.14 | 26 | $5.88 | $152.88 | Quarterly | $6,945.64 |
The $1.47 quarterly dividend gives investors a yield around 2.2%. That’s not enormous, but I don’t need my first TFSA holding coughing up an 8% yield if earnings and the share price are going nowhere.
I’d rather own a company capable of increasing both. At roughly 15 times trailing earnings, Intact also isn’t priced like some untouchable growth darling. Investors can buy a high-quality insurer after a pullback while receiving a growing dividend along the way.
Bottom line
A weaker economy could hurt commercial activity, and acquisitions always carry execution risk. Those are reasons to diversify, not reasons I’d abandon IFC stock.
In short, a first TFSA stock doesn’t need to become the portfolio’s most exciting holding. It needs to give the next $7,000, and the $7,000 after that, a strong foundation to build upon. For me, IFC stock looks like a pretty good first brick.
