A Tax-Free Savings Account (TFSA) is one of the most powerful tools available to eligible Canadians who want to build wealth over time. However, beyond just saving, you can leverage your TFSA to generate consistent cash flow by investing in dividend-paying stocks. By strategically choosing the right stocks, an investment of $15,000 can evolve into a steady, growing income stream. Here’s how you can turn your TFSA into a cash-generating powerhouse.
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Seize Opportunities in the Current Market: Value Is Key
While the Canadian stock market saw an impressive 20% return last year, this growth is considered an anomaly. Historically, the market has delivered an average return of around 8.8% annually over the past decade. So, while it might be tempting to wait for a market correction to invest, there are still attractive dividend stocks available at good valuations today.
By making thoughtful investments now, you can put your $15,000 to work, transforming it into a wealth-building machine that generates reliable income.
Power Corporation of Canada: A Reliable Dividend Stock for Long-Term Growth
One of the top contenders for your TFSA is Power Corporation of Canada (TSX:POW). As a diversified holding company with interests in financial services, insurance, and asset management, Power Corp. gives you exposure to multiple sectors. Over the years, it has built a reputation as a stable dividend payer with solid growth potential.
With a 10-year average return of nearly 10%, Power Corp. stands out as a dividend-paying powerhouse. Currently, the company offers a dividend yield of 4.5%, well above the Canadian market’s average of 2.8%.
At the time of writing, Power Corp. trades at $50.44 per share, and analysts have set a near-term price target of $51.81, indicating that it is fairly valued. A $7,500 investment in Power Corp. could yield approximately $337 annually in dividends. Additionally, Power Corp.’s commitment to increasing dividends suggests that you could see even greater payouts in the near future, especially with an upcoming potential dividend hike.
Bank of Nova Scotia: A Dividend Champion at a Discount
Another solid choice to consider for your TFSA is Bank of Nova Scotia (TSX:BNS), one of Canada’s most established and reliable dividend payers. Scotiabank has a rich history of paying dividends, with a track record that spans back to 1833. It has consistently maintained or increased its dividend payouts for over 50 years, making it a top pick for long-term income investors.
Recently, Scotiabank’s stock price has dipped by 13% from its 52-week high, offering a unique opportunity to buy at a discount. At a price of $69.70 per share, Scotiabank currently offers a dividend yield of 6.1%, more than double the market average.
With a $7,500 investment in Scotiabank, you could earn approximately $456 annually in dividends. This combination of reliable income and potential for long-term growth makes Scotiabank an appealing stock for your TFSA, particularly for those seeking consistent returns.
The Foolish Investor Takeaway: How to Build a Cash-Flowing TFSA
By investing $15,000 into dividend-paying stocks such as Power Corp. and Bank of Nova Scotia, you can transform your TFSA into a cash-flowing powerhouse. These stocks not only provide steady income but also offer solid growth potential over time.
Whether you’re seeking stability through consistent payouts or the opportunity to reinvest dividends and benefit from compounding growth, both Power Corp. and Scotiabank are strong candidates to maximize the potential of your TFSA.
Should You Invest $1,000 in Bank of Nova Scotia Right Now?
Before you commit to investing in Bank of Nova Scotia, it’s important to note that while the bank is a solid pick for reliable dividends, it may not be the top choice according to recent analyses.
The Motley Fool Stock Advisor Canada team has identified the Top Stocks for 2025 and Beyond, and surprisingly, Bank of Nova Scotia didn’t make the list. However, there are other stocks that could offer massive potential, such as MercadoLibre, which the team recommended back in 2014. If you had invested $1,000 in MercadoLibre at that time, it would be worth $21,058.57 today.
For those seeking comprehensive guidance on building a successful portfolio, the Motley Fool Stock Advisor Canada service offers regular updates, recommendations, and insights on stock picks that could outperform the market.
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Final Thoughts: Use Dividend Stocks to Unlock the Power of Your TFSA
Incorporating dividend-paying stocks into your TFSA is a savvy way to generate long-term wealth. With careful stock selection, you can turn your $15,000 investment into a reliable source of income. Power Corp. and Bank of Nova Scotia are just two of the many options available, offering attractive dividends and growth potential.
Remember, your TFSA is a powerful wealth-building tool, and investing in high-quality dividend stocks can unlock its full potential—helping you to achieve financial independence and long-term success.
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