How to Earn More Than $1,000,000 in a Year With Little Work

Use your TFSA to achieve your financial dreams through investing in stocks like Canadian Tire Corporation Limited (TSX:CTC.A).

| More on:

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

If you’ve been saving diligently, maximizing your TFSA contributions, and investing intelligently in quality dividend stocks, your TFSA should be at about $100,000.

It doesn’t take as long as you think to get to a $1,000,000 TFSA portfolio from that point. To be exact, we have these reasonable assumptions in mind: the portfolio yields 3% and is growing by 10%. You’re also making $6,000 of annual contributions to the account for tax-free returns.

Investing in the TFSA is highly in the investors’ favour because there are no tax hindrances. That’s why you get to reinvest the dividends you receive in full.

The interesting part is this: once you get the first $1,000,000, the second million can be achieved in roughly four years, and the third million in three years, and the fourth million in one year. This is all possible thanks to your consistent savings, the power of compounding and reinvesting dividends, and no tax dampener.

Notice that from year 24 to 25, you would earn $1,107,607. There’s your earning more than a million dollars in a year with little work. All the while, you’re investing only $6,000 every year.

Early on in your investing career, your contributions do the heavy lifting, but the longer you stay invested, the more your investments do the work. Essentially, you’re getting your money to work hard for you so that you can work less if you choose to, or you can do the things that you love whether you get paid or not.

Year Portfolio Annual Dividend Dividend to Reinvest Portfolio with Dividends Reinvested
0 $100,000 $3,000 $3,000 $100,000
1 $116,600 $3,498 $3,498 $119,900
2 $134,860 $4,046 $4,046 $142,940
3 $154,946 $4,648 $4,648 $169,677
4 $177,041 $5,311 $5,311 $200,771
5 $201,345 $6,040 $6,040 $237,013
6 $228,079 $6,842 $6,842 $279,345
7 $257,487 $7,725 $7,725 $328,893
8 $289,836 $8,695 $8,695 $387,007
9 $325,419 $9,763 $9,763 $455,301
10 $364,561 $10,937 $10,937 $535,711
11 $407,617 $12,229 $12,229 $630,557
12 $454,979 $13,649 $13,649 $742,627
13 $507,077 $15,212 $15,212 $875,269
14 $564,385 $16,932 $16,932 $1,032,505
15 $627,423 $18,823 $18,823 $1,219,176
16 $696,766 $20,903 $20,903 $1,441,103
17 $773,042 $23,191 $23,191 $1,705,297
18 $856,946 $25,708 $25,708 $2,020,199
19 $949,241 $28,477 $28,477 $2,395,980
20 $1,050,765 $31,523 $31,523 $2,844,901
21 $1,162,441 $34,873 $34,873 $3,381,744
22 $1,285,286 $38,559 $38,559 $4,024,336
23 $1,420,414 $42,612 $42,612 $4,794,186
24 $1,569,056 $47,072 $47,072 $5,717,250
25 $1,732,561 $51,977 $51,977 $6,824,857

Getting a 3% yield and growth of 10%

Currently, a stock that roughly fits these criteria is Canadian Tire (TSX:CTC.A). The iconic Canadian retailer has been very well managed with a high five-year return on equity of 14%. Currently, the quality stock offers a yield of 2.8% and has increased its dividend by 16% per year on average in the last 15 years.

Canadian Tire has expanded its payout ratio from 15% to 32% over the one-and-a-half decade. The payout ratio of 32% is still safe, but it could mean slower (but still excellent) dividend growth in the future.

Going forward, the retailer’s dividend increases should more or less match its earnings growth at roughly 10% per year.

CTC.A PE Ratio (TTM) Chart

CTC.A PE Ratio (TTM) data by YCharts

Currently, the stock is actually undervalued compared to its historical valuations because the market is worried about the competitive retail landscape, particularly from mega-sized e-commerce companies like Amazon. The graph above shows that it’s trading at the low end of its P/E range.

<CTC.A Average Diluted Shares Outstanding (Annual) Chart

CTC.A Average Diluted Shares Outstanding (Annual) data by YCharts

One way that Canadian Tire can return value to shareholders is by buying back its own common shares at a discount. The company has reduced its share count by roughly 20% since 2014! Now would be a great opportunity for the retailer to buy back shares at a bargain.

Some final thoughts

By getting a yield of 3%, investors only need to seek earnings growth of 7% to get the 10% portfolio growth. Moreover, it would make much more sense that your portfolio may have stocks yielding 0-6% with different growth rates. Typically, no or low-yielding stocks offer higher growth.

The scenario above assumes smooth-sailing investing which is seldom the case in real life — markets do correct and crash from time to time, at which time money invested, including dividends reinvested, will generate even greater long-term returns than what our goal requires.

One more thing, the TFSA contribution room will increase over time. If you continue to max out your TFSA every year and invest intelligently, you’ll only get to that $1 million and the next million dollars quicker!

Should you invest $1,000 in The Bank of Nova Scotia right now?

Before you buy stock in The Bank of Nova Scotia, 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 The Bank of Nova Scotia 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 $20,697.16!*

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 29 percentage points since 2013*.

See the Top Stocks * Returns as of 3/20/25

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Kay Ng has no position in any of the stocks mentioned.

Confidently Navigate Market Volatility: Claim Your Free Report!

Feeling uneasy about the ups and downs of the stock market lately? You’re not alone. At The Motley Fool Canada, we get it — and we’re here to help. We’ve crafted an essential guide designed to help you through these uncertain times: "5-Step Checklist: How to Prepare Your Portfolio for Volatility."

Don't miss out on this opportunity for peace of mind. Just click below to learn how to receive your complimentary report today!

Get Our Free Report Today

More on Dividend Stocks

money goes up and down in balance
Dividend Stocks

Invest $25,000 in These Dividend Stocks to Combat Currency Fluctations

These dividend stocks could turn a $25,000 investment into a huge income stream – and help battle ongoing volatility.

Read more »

exchange traded funds
Dividend Stocks

I’d Invest $12,000 in These 3 High-Yield Dividend ETFs for Passive Income

Market turbulence? Sleep easy with these three high-yield dividend ETFs that provide steady monthly income while you wait for recovery.

Read more »

Canadian dollars in a magnifying glass
Dividend Stocks

How I’d Use $15,000 in 3 Monthly Dividend Stocks for Consistent Income Potential

Monthly dividend-paying stocks like Peyto Exploration and Development offer generous yields and strong growth prospects.

Read more »

A worker gives a business presentation.
Dividend Stocks

Where I’d Allocate $10,000 in Dividend Stocks for Decade-Long Appreciation

Here are two TSX dividend stocks I’d buy for long-term capital gains and dividend income if I had $10,000 to…

Read more »

Blocks conceptualizing Canada's Tax Free Savings Account
Dividend Stocks

Can the Maximum TFSA Room Keep Up With Inflation?

Just because you want to make major gains in a TFSA during inflation doesn't mean making risky investments.

Read more »

hand stacking money coins
Dividend Stocks

RRSP Investors: 2 TSX Stocks With High Dividend Yields to Consider Now

These TSX stocks now offer dividend yields above 6%.

Read more »

woman analyze data
Dividend Stocks

Why I’d Allocate $8,000 to These 3 Low-Volatility TSX Stocks for Steady Returns

Low-volatility TSX stocks like Fortis can offer investors some predictability and shelter in this wildly volatile market.

Read more »

Man looks stunned about something
Dividend Stocks

Trump Crashed Your Stocks? Read This Before Selling

When markets crash, dollar cost averaging into dividend funds like BMO Canadian Dividend ETF (TSX:ZDV) often works.

Read more »