TFSA Investors: Where to Invest $6,500 in 2023

Use the TFSA to buy and hold a basket of quality growth and dividend stocks to generate outsized gains in 2023 and beyond.

| More on:

After a tumultuous year in 2022, investors would be looking to regain a portion of their equity losses over the next 12 months. Canadian investors have multiple accounts that can be used to buy and hold quality stocks over the long term. One such popular account is the TFSA or Tax-Free Savings Account.

Introduced in 2009, the TFSA is a tax-sheltered account. So, any income generated in the TFSA will be exempt from Canada Revenue Agency taxes. Let’s see how to use the TFSA and build long-term wealth.

The TFSA contribution limit is $6,500 for 2023

Each year, the TFSA contribution limit increases for Canadian investors. For 2023, the TFSA contribution limit stands at $6,500, bringing the total cumulative limit to $88,000. Given the benefits, it makes sense for investors to hold a basket of growth and dividend stocks in their TFSA.

While growth stocks are trading at a much lower multiple in 2023, you can buy quality companies at a discount and derive exponential gains in the upcoming decade. Comparatively, dividend stocks can help investors generate a steady stream of dividend income each quarter as well as increase total returns by long-term capital gains.

Here are a few such stocks you can hold in your TFSA right now.

Enbridge

One of the largest companies on the TSX, Enbridge (TSX:ENB) has created significant wealth for investors in the last two decades. Despite its outsized gains, Enbridge currently offers investors a tasty dividend yield of more than 6%, making it attractive to income-seeking investors.

Enbridge derives a significant portion of its cash flows from long-term contracts that are indexed to inflation, allowing it to maintain and even increase dividend payouts across market cycles.

Royal Bank of Canada

Valued at a market cap of $180.4 billion, Royal Bank of Canada (TSX:RY) also offers investors a forward yield of 4.1%. Canadian banks are much more conservative compared to their counterparts south of the border. But this conservative outlook has meant the balance sheet of Royal Bank of Canada and its peers is well capitalized.

While several U.S. banks cut or even suspended dividends during the financial crash of 2008, RY stock could easily maintain these payouts, showcasing its resiliency.

Snowflake

One of the fastest-growing tech stocks on the planet, Snowflake (NYSE:SNOW) operates in the data analytics space. Snowflake has increased its sales from US$96.6 million in fiscal 2019 (ended in January) to US$1.21 billion in fiscal 2022. Analysts now expect the top line to surge to US$2 billion in fiscal 2023 and US$3 billion in fiscal 2024.

Valued at a market cap of almost US$40 billion, Snowflake stock is priced at 13 times fiscal 2024 sales, which is quite steep. But analysts remain bullish on the tech stock and expect shares to gain almost 50% in the next 12 months.

Gildan Activewear

The final stock on my list is Gildan Activewear (TSX:GIL), one of the most popular retail companies in Canada. After adjusting for dividends, Gildan has returned 390% to shareholders in the last decade.

Trading 27% below all-time highs, the retail heavyweight offers shareholders a dividend yield of 2.5%. GIL stock is trading at a discount of 25%, given consensus price target estimates.

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 Aditya Raghunath has positions in Enbridge. The Motley Fool recommends Enbridge, Gildan Activewear, and Snowflake. The Motley Fool has a disclosure policy.

More on Dividend Stocks

Middle aged man drinks coffee
Dividend Stocks

Here’s the Average TFSA Balance at Age 35 in Canada

At age 35, it might not seem like you need to be thinking about your future cash flow. But ideally,…

Read more »

ETF stands for Exchange Traded Fund
Dividend Stocks

How to Invest Your $7,000 TFSA Contribution in 2024

Here's how I would prioritize a $7,000 TFSA contribution for growth and income.

Read more »

a man relaxes with his feet on a pile of books
Dividend Stocks

CPP Pensioners: Watch for These Important Updates

The CPP is an excellent tool for retirees, but be sure to stay on top of important updates like these.

Read more »

Technology
Dividend Stocks

TFSA Investors: 3 Dividend Stocks I’d Buy and Hold Forever

These TSX dividend stocks are likely to help TFSA investors earn steady and growing passive income for decades.

Read more »

four people hold happy emoji masks
Dividend Stocks

Love Dividend Growth? Check Out These 2 Income-Boosting Stocks

National Bank of Canada (TSX:NA) and another Canadian dividend-growth stock are looking like a bargain going into December 2024.

Read more »

An investor uses a tablet
Dividend Stocks

A Dividend Giant I’d Buy Over Enbridge Stock Right Now

Enbridge stock may seem like the best of the best in terms of dividends, but honestly this one is far…

Read more »

how to save money
Dividend Stocks

Got $1,000? The 3 Best Canadian Stocks to Buy Right Now

If you're looking for some cash flow from your $1,000 investment, these are the ideal investments to make.

Read more »

TFSA (Tax-Free Savings Account) on wooden blocks and Canadian one hundred dollar bills.
Dividend Stocks

A Dividend Giant I’d Buy Over BCE Stock Right Now

Don't get sucked in by BCE's 10% dividend -- the stock is a total yield trap. Buy this instead.

Read more »