The TFSA Withdrawal Rule Every Canadian Should Know

The account is a much better place to invest long term than to make frequent trades and withdrawals.

Key Points
  • Brookfield combines a 4.4% dividend yield with strong fundraising and expanding global investment opportunities.
  • Canadian Tire offers a 3.8% yield alongside improving earnings, growing e-commerce sales, and a broader loyalty strategy.
  • Both TFSA-friendly companies continue to invest for growth while returning capital to shareholders.

A Tax-Free Savings Account (TFSA) gives you a lot of flexibility, but that flexibility can also lead to mistakes. You can withdraw money whenever you want without paying tax, which sounds simple enough. The part Canadians sometimes forget is that you have to wait until the next calendar year to get that withdrawal amount added back to your contribution room limit.

Put the money back too soon without enough available room, and you could create an overcontribution problem. That is one reason I always recommend treating a TFSA as a place for long-term investing instead of constant trading and withdrawals. The longer you remain invested in fundamentally strong businesses, the more time their earnings, dividends, and share-price growth have to compound.

Here are two top Canadian stocks I think are worth holding patiently inside a TFSA.

Group of people in a line at an ATM waiting to make a cash withdrawal

Source: Getty Images

Brookfield Asset Management

If you want a TFSA holding that combines dividend income with exposure to global growth trends, Brookfield Asset Management (TSX: BAM) is definitely worth taking a closer look.

Headquartered in New York, BAM is a global alternative asset manager with more than US$1 trillion in assets under management across infrastructure, energy, private equity, real estate, and credit. Its stock trades around $66 per share with a market cap of $104.6 billion. It also offers a 4.4% annualized dividend yield at this market price.

BAM’s shares have had a mixed run recently. While it’s down about 21% over the last year, it remains up 5% over the last six months. That weakness makes the stock look undervalued compared with the momentum in Brookfield’s underlying business.

About that: In the second quarter, the asset manager raised a record US$77 billion and deployed US$21 billion. BAM’s fee-related earnings climbed 20% year-over-year (YoY) to US$808 million, while distributable earnings rose 15% YoY to US$707 million. More importantly, fee-bearing capital jumped 19% YoY.

Brookfield has also been building for future growth by completing its acquisition of Oaktree and expanding partnerships tied to artificial intelligence (AI) infrastructure, energy, and private markets.

For TFSA investors who want to keep strong businesses working over the long run, BAM stock’s growth initiatives and 4.4% yield make its recent stock weakness an attractive opportunity.

Canadian Tire

Canadian Tire (TSX: CTC.A) is a smart choice for investors who like the sound of owning an established Canadian business with improving earnings and a steady dividend.

The company owns and operates retailers (such as Mark’s and Party City Canada), gas stations, and commercial properties throughout the country. After gaining 14% in the last year, its shares now trade around $192 per share, giving it a market cap of about $10 billion. The stock also offers a 3.8% annualized dividend yield.

In the June quarter, Canadian Tire’s revenue rose 2.4% YoY, while income before income taxes increased 8.4% to $280 million.

At the same time, there were encouraging signs across its retail banners. For example, SportChek’s comparable sales jumped 8%, while Mark’s comparable sales increased 4.2%. Canadian Tire’s e-commerce sales also grew 14%, showing that its digital channels continue to gain traction.

The company continues to advance its True North strategy through more personalized Triangle credit card loyalty offers, stronger e-commerce capabilities, and refreshed store concepts. Overall, Canadian Tire’s earnings growth, dividend income, and loyalty strategy make it an attractive long-term TFSA hold.

Fool contributor Jitendra Parashar has no position in any of the stocks mentioned. The Motley Fool recommends Brookfield Asset Management. The Motley Fool has a disclosure policy.

More on Dividend Stocks

Young adult concentrates on laptop screen
Dividend Stocks

Opening Your First Investing Account in Canada: What to Know Before You Click “Apply”

Don’t chase returns without first understanding risks.

Read more »

dreaming of financial success
Dividend Stocks

Here’s a 4.2% Monthly Dividend Stock to Help Fund Your Retirement Dreams

This Canadian monthly dividend payer’s attractive 4.2% dividend yield, growing property income, and high occupancy could help you build a…

Read more »

man gives stopping gesture
Dividend Stocks

A No-Spend Month Could Jump-Start Your Emergency Savings

Join the No-Spend Month challenge to take control of your finances and discover the benefits of minimal spending habits.

Read more »

cookies stack up for growing profit
Dividend Stocks

Low-Cost Ways to Earn Extra Income in Canada

These two affordable Canadian dividend stocks could help you turn modest investments into a source of regular extra income.

Read more »

A worker overlooks an oil refinery plant.
Dividend Stocks

A 4.9% Passive-Income Stock I’d Put My Whole TFSA Contribution Into

This Canadian dividend stock’s 4.9% dividend yield, strong cash flow growth, and expanding infrastructure investments make it an attractive passive-income…

Read more »

monthly calendar with clock
Dividend Stocks

The perfect TFSA REIT: A 4.2% Yield With Monthly Paycheques

Killam Apartment REIT (TSX:KMP.UN) pays dividends monthly.

Read more »

A woman stands on an apartment balcony in a city
Dividend Stocks

Mortgage Rates May Rise Again, and so Could This Apartment REIT

CAPREIT offers rental exposure, although higher borrowing costs and softer occupancy make the opportunity more nuanced.

Read more »

telecom towers concept for wireless technology
Dividend Stocks

The Best Canadian Dividend Stock for Passive Income: My 1 Pick and Why

This Canadian dividend stock’s attractive dividend yield, improving operating cash flow, and growing electricity generation business make it compelling for…

Read more »