How I'd Invest $7,000 in My TFSA for $660 in Tax-Free Annual Income
Written by Adam Othman at The Motley Fool Canada
Canadians have plenty of taxes to contend with, making it incredibly difficult to get the best use out of any savings they have to contribute to their retirement plans or any short- or long-term financial goals. Fortunately, the Tax-Free Savings Account (TFSA) has been a big blessing for Canadians since the account type was introduced in 2009.
As the name suggests, the TFSA is an account that you can use to enjoy returns on savings in the account without incurring taxes. However, the tax-sheltered returns in the account are not limited to interest earned on cash held in a TFSA. You can use the TFSA as an investment vehicle to hold more than cash, including investments in the stock market.
This means that any returns on dividends or capital gains from holdings in the account can grow your wealth without any taxes. Each year, the Canada Revenue Agency (CRA) increases the TFSA contribution limit. For 2025, the new contribution limit is $7,000. If I were to use the new contribution room, here's a quick look at how I'd try to earn around $600 in tax-free income each year by investing in two TSX dividend stocks.
Dividend stocks are publicly traded companies offering investors quarterly or monthly payouts from profits to reward them for loyalty. Investing in a dividend stock and holding its shares in a TFSA effectively lines your account balance with extra cash. You can then reinvest the dividend income to purchase more shares of dividend stocks, unlocking the power of compounding to accelerate your wealth growth in a TFSA. I will discuss two high-quality dividend stocks you can use with a hypothetical $7,000 contribution room.
Cardinal Energy (TSX:CJ) is a Calgary-based, $916.57 market capitalization company that engages in the acquisition, exploration, and production of petroleum and natural gas in Saskatchewan and Alberta. The company generates sizeable revenue through its operations, which it uses to expand its portfolio and deliver returns to investors through shareholder dividends every month.
As of this writing, CJ stock trades for $5.71 per share and boasts a 12% annualized forward yield. Considering that you are getting paid that much for simply owning the stock, that is a pretty good return on your investment. The company's latest earnings for the end of 2024 saw it report $65.1 million in the quarter, showing a marginal improvement from the same quarter in the previous year. It can be a safe bet to consider for dividend income.
Doman Building Materials Group (TSX:DBM) is a $616.95 market capitalization company headquartered in Vancouver. It is a wholesale distributor of various materials used in home renovation and construction, servicing several markets. Provides materials for industrial, new home construction, and home renovation markets. It also owns and manages several private timberlands and forest licenses, diversifying its revenue streams further.
The vertically integrated building material group reported a 28.5% net decline in its 2024 earnings due to lower pricing for certain construction material categories, but it is a resilient business that has demonstrated the ability to overcome challenges time and again. As of this writing, it trades for $7.08 per share and boasts a 7.91% forward annualized dividend yield that it distributes on a quarterly schedule.
Using the TFSA contribution room to build a portfolio of reliable dividend stocks can provide significant, tax-free returns. While you should never put all your eggs in one or two baskets, below is an example illustrating how you can use $7,000 in a TFSA to generate more than $600 per year in extra income that you can enjoy tax-free.
Stock
Recent Price
No. of Shares
Annualized Div Per Share
Payout Frequency
Annualized Total Payout
CJ
$5.71
539
$0.72
Monthly
$388.08
DBM
$7.08
500
$0.56
Quarterly
$280.00
Total Annual Dividend Income
$668.08
The post How I'd Invest $7,000 in My TFSA for $660 in Tax-Free Annual Income appeared first on The Motley Fool Canada.
Before you buy stock in Cardinal Energy Ltd., consider this:
The Motley Fool Stock Advisor Canada analyst team just identified what they believe are the Top Stocks for 2025 and Beyond for investors to buy now… and Cardinal Energy Ltd. wasn't one of them. The Top Stocks that made the cut could potentially produce monster returns in the coming years.
Consider MercadoLibre, which we first recommended on January 8, 2014 ... if you invested $1,000 in the 'eBay of Latin America' at the time of our recommendation, you'd have $21,345.77!*
Stock Advisor Canada provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month – one from Canada and one from the U.S. The Stock Advisor Canada service has outperformed the return of S&P/TSX Composite Index by 24 percentage points since 2013*.
See the Top Stocks * Returns as of 4/21/25
More reading
Made in Canada: 5 Homegrown Stocks Ready for the 'Buy Local' Revolution [PREMIUM PICKS]
Market Volatility Toolkit
Best Canadian Stocks to Buy in 2025
Beginner Investors: 4 Top Canadian Stocks to Buy for 2025
5 Years From Now, You'll Probably Wish You Grabbed These Stocks
Subscribe to Motley Fool Canada on YouTube
Fool contributor Adam Othman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
2025
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
11 minutes ago
Trump clears path for Nippon Steel investment in US Steel, so long as it fits the government's terms
WASHINGTON -- President Donald Trump on Friday signed an executive order paving the way for a Nippon Steel investment in U.S. Steel, so long as the Japanese company complies with a 'national security agreement' submitted by the federal government. Trump's order didn't detail the terms of the national security agreement. But the iconic American steelmaker and Nippon Steel said in a joint statement that the agreement stipulates that approximately $11 billion in new investments will be made by 2028 and includes giving the U.S. government a ' golden share" — essentially veto power to ensure the country's national security interests are protected against cutbacks in steel production. 'We thank President Trump and his Administration for their bold leadership and strong support for our historic partnership," the two companies said. "This partnership will bring a massive investment that will support our communities and families for generations to come. We look forward to putting our commitments into action to make American steelmaking and manufacturing great again.' The companies have completed a U.S. Department of Justice review and received all necessary regulatory approvals, the statement said. 'The partnership is expected to be finalized promptly,' the statement said. U.S. Steel rose $2.66, or 5%, to $54.85 in afterhours trading Friday. Nippon Steel's original bid to buy the Pittsburgh-based U.S. Steel in late 2023 had been valued at $55 per share. The companies offered few details on how the golden share would work, what other provisions are in the national security agreement and how specifically the $11 billion would be spent. White House spokesman Kush Desai said the order 'ensures U.S. Steel will remain in the great Commonwealth of Pennsylvania, and be safeguarded as a critical element of America's national and economic security.' James Brower, a Morrison Foerster lawyer who represents clients in national security-related matters, said such agreements with the government typically are not disclosed to the public, particularly by the government. They can become public, but it's almost always disclosed by a party in the transaction, such as a company — like U.S. Steel — that is publicly held, Brower said. The mechanics of how a golden share would work will depend on the national security agreement, but in such agreements it isn't unusual to give the government approval rights over specific activities, Brower said. U.S. Steel made no filing with the U.S. Securities and Exchange Commission on Friday. Nippon Steel originally offered nearly $15 billion to purchase U.S. Steel in an acquisition that had been delayed on national security concerns starting during Joe Biden's presidency. As it sought to win over American officials, Nippon Steel gradually increased the amount of money it was pledging to invest into U.S. Steel. American officials now value the transaction at $28 billion, including the purchase bid and a new electric arc furnace — a more modern steel mill that melts down scrap — that they say Nippon Steel will build in the U.S. after 2028. Nippon Steel had pledged to maintain U.S. Steel's headquarters in Pittsburgh, put U.S. Steel under a board with a majority of American citizens and keep plants operating. It also said it would protect the interests of U.S. Steel in trade matters and it wouldn't import steel slabs that would compete with U.S. Steel's blast furnaces in Pennsylvania and Indiana. Trump opposed the purchase while campaigning for the White House, and using his authority Biden blocked the transaction on his way out of the White House. But Trump expressed openness to working out an arrangement once he returned to the White House in January. Trump said Thursday that he would as president have 'total control' of what U.S. Steel did as part of the investment. Trump said then that the deal would preserve '51% ownership by Americans,' although Nippon Steel has never backed off its stated intention of buying and controlling U.S. Steel as a wholly owned subsidiary. 'We have a golden share, which I control,' Trump said. Trump added that he was 'a little concerned' about what presidents other than him would do with their golden share, 'but that gives you total control.' The proposed merger had been under review by the Committee on Foreign Investment in the United States, or CFIUS, during the Trump and Biden administrations. The order signed Friday by Trump said the CFIUS review provided 'credible evidence' that Nippon Steel 'might take action that threatens to impair the national security of the United States,' but such risks might be 'adequately mitigated' by approving the proposed national security agreement. The order doesn't detail the perceived national security risk and only provides a timeline for the national security agreement. The White House declined to provide details on the terms of the agreement. The order said the draft agreement was submitted to U.S. Steel and Nippon Steel on Friday. The two companies must successfully execute the agreement as decided by the Treasury Department and other federal agencies that are part CFIUS by the closing date of the transaction.
Yahoo
41 minutes ago
- Yahoo
Longtime spokesperson Tom Bodett sues Motel 6
The Brief Tom Bodett filed a federal lawsuit against Motel 6, claiming the chain used his voice and name without authorization after their contract ended. The dispute stems from a missed $1.2 million payment and the breakdown of a nearly 40-year partnership between Bodett and the motel brand. Motel 6's parent company, G6 Hospitality, said it was surprised by the lawsuit but expressed appreciation for Bodett's contributions. Tom Bodett, whose warm baritone and iconic line "we'll leave the light on for you" made him the voice of Motel 6 for nearly four decades, is suing the motel chain and its parent company for alleged unauthorized use of his name and voice. According to a lawsuit filed Monday in Manhattan federal court, Bodett said he ended his relationship with Motel 6 after its new owner, India-based travel firm OYO, failed to make a $1.2 million annual payment due on Jan. 7. Their contract was set to expire in November. The backstory Despite the contract lapse, Bodett claims Motel 6 continued using his voice and name on its national reservation phone line. The lawsuit alleges violations of both his contract rights and federal trademark law. Bodett said he attempted to reach a confidential settlement that would honor his legacy and protect Motel 6's reputation and franchisees, but accused the company of responding with "misrepresentations, obfuscations, and delay tactics." The lawsuit seeks $1.2 million in owed compensation, along with additional damages and a share of profits. What they're saying A spokesperson for G6 Hospitality, the parent company of Motel 6, said the company was "surprised" by Bodett's lawsuit but indicated it hoped for an amicable resolution. "We appreciate Mr. Bodett's contributions over the past years," the spokesperson said. "Of course, we will continue to advertise keeping the lights on for you." Bodett, when contacted by email, told Reuters: "The complaint says all there is to say." Tom Bodett became Motel 6's lead spokesman in 1986 and said he coined the phrase "we'll leave the light on for you" during an unscripted ad-lib. His voice became synonymous with the brand's down-to-earth identity and was featured in both radio and TV campaigns for decades. In addition to his advertising work, Bodett is known for his appearances on National Public Radio and for narrating several Ken Burns documentaries. What's next The lawsuit, Bodett et al v G6 Hospitality LLC et al, was filed in the U.S. District Court for the Southern District of New York. It could set a notable precedent for voice usage and contract rights in long-term brand relationships, especially as companies change ownership. The Source This report is based on original reporting from Reuters, which first detailed the lawsuit filed by Tom Bodett against Motel 6 and its parent company G6 Hospitality. The article includes direct quotes from legal filings and statements provided to Reuters by both Bodett and Motel 6.
41 minutes ago
Trump clears path for Nippon investment in US Steel, so long as it fits gov't terms
WASHINGTON -- President Donald Trump on Friday signed an executive order paving the way for a Nippon Steel investment in U.S. Steel, so long as the Japanese company complies with a 'national security agreement' submitted by the federal government. Trump's order didn't detail the terms of the national security agreement. But the iconic American steelmaker and Nippon Steel said in a joint statement that the agreement stipulates that approximately $11 billion in new investments will be made by 2028 and includes giving the U.S. government a ' golden share" — essentially veto power to ensure the country's national security interests are protected against cutbacks in steel production. 'We thank President Trump and his Administration for their bold leadership and strong support for our historic partnership," the two companies said. "This partnership will bring a massive investment that will support our communities and families for generations to come. We look forward to putting our commitments into action to make American steelmaking and manufacturing great again.' The companies have completed a U.S. Department of Justice review and received all necessary regulatory approvals, the statement said. 'The partnership is expected to be finalized promptly,' the statement said. U.S. Steel rose $2.66, or 5%, to $54.85 in afterhours trading Friday. Nippon Steel's original bid to buy the Pittsburgh-based U.S. Steel in late 2023 had been valued at $55 per share. The companies offered few details on how the golden share would work, what other provisions are in the national security agreement and how specifically the $11 billion would be spent. White House spokesman Kush Desai said the order 'ensures U.S. Steel will remain in the great Commonwealth of Pennsylvania, and be safeguarded as a critical element of America's national and economic security.' James Brower, a Morrison Foerster lawyer who represents clients in national security-related matters, said such agreements with the government typically are not disclosed to the public, particularly by the government. They can become public, but it's almost always disclosed by a party in the transaction, such as a company — like U.S. Steel — that is publicly held, Brower said. The mechanics of how a golden share would work will depend on the national security agreement, but in such agreements it isn't unusual to give the government approval rights over specific activities, Brower said. U.S. Steel made no filing with the U.S. Securities and Exchange Commission on Friday. Nippon Steel originally offered nearly $15 billion to purchase U.S. Steel in an acquisition that had been delayed on national security concerns starting during Joe Biden's presidency. As it sought to win over American officials, Nippon Steel gradually increased the amount of money it was pledging to invest into U.S. Steel. American officials now value the transaction at $28 billion, including the purchase bid and a new electric arc furnace — a more modern steel mill that melts down scrap — that they say Nippon Steel will build in the U.S. after 2028. Nippon Steel had pledged to maintain U.S. Steel's headquarters in Pittsburgh, put U.S. Steel under a board with a majority of American citizens and keep plants operating. It also said it would protect the interests of U.S. Steel in trade matters and it wouldn't import steel slabs that would compete with U.S. Steel's blast furnaces in Pennsylvania and Indiana. Trump opposed the purchase while campaigning for the White House, and using his authority Biden blocked the transaction on his way out of the White House. But Trump expressed openness to working out an arrangement once he returned to the White House in January. Trump said Thursday that he would as president have 'total control' of what U.S. Steel did as part of the investment. Trump said then that the deal would preserve '51% ownership by Americans,' although Nippon Steel has never backed off its stated intention of buying and controlling U.S. Steel as a wholly owned subsidiary. 'We have a golden share, which I control,' Trump said. Trump added that he was 'a little concerned' about what presidents other than him would do with their golden share, 'but that gives you total control.' The proposed merger had been under review by the Committee on Foreign Investment in the United States, or CFIUS, during the Trump and Biden administrations. The order signed Friday by Trump said the CFIUS review provided 'credible evidence' that Nippon Steel 'might take action that threatens to impair the national security of the United States,' but such risks might be 'adequately mitigated' by approving the proposed national security agreement. The order doesn't detail the perceived national security risk and only provides a timeline for the national security agreement. The White House declined to provide details on the terms of the agreement. The order said the draft agreement was submitted to U.S. Steel and Nippon Steel on Friday. The two companies must successfully execute the agreement as decided by the Treasury Department and other federal agencies that are part CFIUS by the closing date of the transaction. Trump reserves the authority to issue further actions regarding the investment as part of the order he signed on Friday.
