The tax season in Canada is here, which means you need to look at various options that will help reduce the overall tax bill. One non-refundable tax credit that can be claimed by all Canadian residents is the basic personal amount, or the BPA.
This tax credit aims to lower income tax for those with taxable income below the BPA. Additionally, the basic personal amount also provides a partial reduction to those with taxable income above the BPA.
What is the basic personal amount tax credit?
Similar to other non-refundable tax credits, the BPA reduces what you eventually owe. So, if the tax credit is more than what you owe, you are not eligible to get a refund for the difference in amount.
The BPA was increased to $13,229 in 2020 from $12,298 for residents with a net income of less than $150,473. The BPA has increased to $14,398 for the taxation year 2022 and will stand at $15,000 for the taxation year 2023.
You are eligible to claim 15% of this amount as a tax credit, which will lower your tax liability by $2,159.70 this year.
Use the tax credit and invest it in Cargojet stock
While saving on taxes is advisable, you also need to put these savings to work. One way is to allocate these savings towards buying blue-chip TSX stocks such as Cargojet (TSX:CJT). For instance, an investment of $2,000 in Cargojet stock 10 years back would be worth a staggering $30,700 today.
Despite these outsized gains, CJT stock is currently trading 54% below all-time highs, allowing you to buy the dip. While past returns should not matter much for future investors, let’s see why you need to buy Cargojet stock in March 2023.
Is Cargojet stock a buy, sell, or hold?
Cargojet provides time-sensitive premium air cargo services to major cities in North America. It carries 25 million pounds of cargo weekly and operates its network fleet of 34 aircraft. Founded in 2001, Cargojet increased revenue from $169 million in 2012 to $980 million in 2022.
Its mix of volume-centric business has fallen from 65% to 45% in the last decade, leading to higher stability in revenue. Its domestic overnight business has also grown from $109 million to $341 million in this period.
Cargojet’s partnership with DHL in recent years drove growth in the ACMI (aircraft, crew, maintenance, and insurance) vertical for the company, while strength in the charter business was due to the successful leveraging of domestic and ACMI networks.
These strategic partnerships allow Cargojet to enjoy a competitive advantage on the back of cost savings and a robust network. The long-term prospects for Cargojet remain solid, given an expanding e-commerce market will bolster air cargo volumes in 2023 and beyond.
Further, while freighter fleets globally are forecast to grow in the future, the supply will be insufficient to keep pace with overall demand.
Cargojet has a diversified customer base with strategic contracts that have staggered expiry terms, allowing the company to generate cash flows across business cycles. It has a strong balance sheet with sustainable debt levels.
Priced at two times forward sales and 15.6 times forward sales, Cargojet stock is trading at a discount of 60%, given consensus price target estimates.
