As the end of the year approaches, it’s an ideal time to focus on maximizing your Tax-Free Savings Account (TFSA) contributions. For 2024, the contribution limit is set at $7,000, and filling it before year-end could set you up for significant tax-free gains. If you haven’t yet taken full advantage of this opportunity, now’s the time to act. The TFSA is a fantastic tool for Canadians looking to grow their wealth. Whether through dividends, interest, or capital gains, all without the burden of taxes.
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Why a TFSA?
One of the standout benefits of the TFSA is its flexibility. Unlike some other tax-advantaged accounts, you can withdraw funds at any time without penalties or taxes. Even better, the amount you withdraw will be added back to your contribution room the following year. So, you never lose the opportunity to invest that money again. This makes the TFSA not only a great vehicle for long-term growth but also a solid option for shorter-term financial goals.
The tax-free nature of the TFSA is especially beneficial for high-growth stocks and dividend earners. Investments that generate substantial returns can grow and compound without being eroded by taxes. Over the years, this can make a massive difference in your overall wealth. So, which stocks could perform the best?
Sun Life
Let’s take a closer look at Sun Life Financial (TSX:SLF), a Canadian giant in the financial services sector. Sun Life has been a steady performer, recently reporting stellar third-quarter (Q3) earnings. Underlying net income for Q3 2024 rose by 9% year over year to $1,016 million. Revenue growth in wealth and asset management played a key role in this success, highlighting Sun Life’s ability to adapt and thrive in a competitive market. Furthermore, the company’s quarterly earnings growth of 53.7% year over year reflects its robust operational performance and ability to capitalize on new opportunities.
From a valuation perspective, SLF offers a forward price-to-earnings (P/E) ratio of 11.45. This suggests it’s reasonably priced compared to its growth potential. Furthermore, its forward annual dividend yield of 3.90% provides steady income, making it a solid choice for dividend investors. The company’s strategic expansion into Asian markets and growing global partnerships enhance its growth outlook, making it a compelling addition to any TFSA portfolio.
TFI stock
TFI International (TSX:TFII), a leader in the transportation and logistics sector, is another top pick for a year-end TFSA contribution. The stock has consistently demonstrated its ability to weather market challenges while delivering strong results. In Q3 2024, the company reported operating income of $203.3 million — up slightly from the previous year despite facing weaker freight market conditions. This resilience is largely due to TFI’s strategic acquisitions and operational efficiencies. These have bolstered its position as a market leader.
TFI’s forward P/E ratio of 19.19 reflects investor confidence in its future growth. Its annual dividend yield of 1.19% adds an extra layer of appeal for income-focused investors. Over the past year, the company’s stock has delivered strong returns, with a 52-week price range that demonstrates its ability to capitalize on market opportunities. Looking ahead, TFI’s focus on expanding its service offerings and integrating new acquisitions is expected to drive continued growth.
Perfect combo
Why are SLF and TFII particularly suited for a TFSA? Both companies exhibit a combination of strong past performance, attractive dividends, and future growth potential. With SLF, you’re investing in a stable financial services provider with global reach. And with TFII, you’re tapping into a resilient logistics powerhouse. Together, these provide a balance of income and growth, ideal for long-term compounding within the tax-free environment of a TFSA.
By contributing the maximum $7,000 to your TFSA before the year ends, you’re not only capitalizing on tax-free growth. You’re also securing a larger contribution room for the years to come. Choosing strong-performing stocks like Sun Life and TFI ensures that your TFSA works harder for you. Whether your goal is to generate passive income or grow your wealth over the long term, these companies provide the kind of stability and potential that can help you achieve it.
