Dividend investing is a good strategy for those looking to create a passive income stream. While dividends are not guaranteed, the companies that offer these payouts to shareholders typically generate steady profits across market cycles.
Additionally, if you own such stocks in a TFSA (Tax-Free Savings Account), any returns in the form of dividends or capital gains are exempt from taxes. A flexible registered account introduced in 2009, the TFSA is very popular among Canadians.
The maximum cumulative contribution limit in a TFSA stands at $88,000 in 2023. So, let’s look at three ways dividend stocks can help you earn more than $1,000 a year if you have a $20,000 TFSA in 2023.
Invest in dividend growth stocks such as Enbridge
Energy giant Enbridge (TSX:ENB) currently offers investors a tasty dividend yield of 6.6%, given it pays investors annual dividends of $3.55 per share. So, an investment of $20,000 in ENB stock will help you earn $1,320 in annual dividends.
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY |
| Enbridge | $53.49 | 374 | $0.888 | $332 | Quarterly |
| Goeasy | $90.42 | 221 | $0.96 | $212 | Quarterly |
| Slate Grocery | $13.20 | 1,515 | $0.098 | $148.5 | Monthly |
Enbridge is a well-diversified midstream company that generates stable cash flows. A majority of these cash flows are tied to rate-regulated long-term contracts, making the company immune to fluctuations in commodity prices.
Enbridge has increased dividends by 10% annually in the last 28 years, making it one of the most popular dividend stocks among Canadians. An investment of $20,000 in ENB stock back in April 1995 would have allowed you to buy 5,263 shares of the company.
These shares would generate close to $1,316 in annual dividends in the next 12 months. Today, investors would earn more than $18,500 in annual dividends if they held 5,263 shares of Enbridge.
Hold high dividend stocks in your TFSA
High dividend stocks such as Slate Grocery (TSX:SGR.UN) can help you generate inflation-beating returns over time. Right now, Slate Grocery pays investors a forward yield of 8.9%. So, a $20,000 investment in the TSX stock will help you earn $1,780 in annual dividends.
Slate Grocery is a real estate investment trust that helps you diversify your portfolio. It owns and operates $1.3 billion of critical real estate in major U.S. markets. Slate’s grocery-anchored properties and investment-grade tenants allow it to pay shareholders a monthly dividend.
Down 29% from all-time highs, Slate Grocery REIT stock has returned 9.8% annually in the last nine years after adjusting for dividends.
Reinvest dividends of growth stocks
Investors can also consider reinvesting the dividends of growth stocks such as Goeasy (TSX:GSY). A financial lending company, Goeasy stock has returned a staggering 3,320% to investors after adjusting for dividend reinvestments in the last 20 years.
Despite these outsized gains, GSY stock offers you a dividend yield of 4.2%, which is quite tasty. So, an investment of $20,000 in GSY stock will help you earn $840 in annual dividends.
While Goeasy is part of a cyclical sector, it has increased dividends by 23% annually in the last 19 years, which is quite remarkable.
Down 59% from all-time highs, GSY stock is priced at a cheap forward price-to-earnings multiple of 6.3 times. It’s also trading at a discount of 75% to consensus price target estimates.
