Transform Your TFSA Into a Money-Making Machine With Just $12,000

Your TFSA isn’t just for saving; it’s for making money. So, here’s how to start pumping it out with just $12,000.

| More on:
Canadian dollars are printed

Source: Getty Images

Transforming your Tax-Free Savings Account (TFSA) into a money-making machine doesn’t require a massive investment. With just $12,000, you can set up a steady income stream by focusing on solid Canadian stocks that offer both stability and growth. Two great picks for this strategy are Exchange Income (TSX:EIF) and Bank of Nova Scotia (TSX:BNS). Both provide strong dividends and long-term appreciation potential. By holding these stocks in a TFSA, investors can benefit from tax-free income and compounding returns over time.

EIF

Exchange Income is a diversified acquisition-oriented company with holdings in aerospace, aviation, and manufacturing. It has been a strong performer on the TSX, averaging an impressive annual return of 19% over the past 19 years. This means it has outpaced the broader TSX market and rewarded long-term shareholders with significant gains. What makes EIF particularly appealing is its ability to generate consistent revenue across multiple industries, reducing the risks associated with relying on a single sector. Investors looking for stability with strong dividend payments have found EIF to be a reliable choice.

In its latest earnings report for the third quarter of 2024, Exchange Income posted record results, with net earnings reaching $56 million, up from $50 million in the same period the previous year. The company managed to achieve this growth despite facing higher interest expenses and depreciation costs. This resilience demonstrates the strength of its diversified business model. And this allows it to weather economic fluctuations while continuing to expand. Its ability to generate reliable cash flow has also made it a favourite among dividend investors who value steady income.

Looking ahead, EIF continues to show promise. The company is actively expanding its operations through strategic acquisitions and investments in high-growth sectors. With a forward dividend yield of nearly 5%, it remains an attractive choice for those looking to build passive income. Given its strong track record and disciplined approach to capital allocation, EIF appears well-positioned to continue delivering value to shareholders in the years to come.

Scotiabank

On the other side of the portfolio, Bank of Nova Scotia provides a stable, blue-chip investment with a long history of paying dividends. Commonly known as Scotiabank, BNS is one of Canada’s largest financial institutions and plays a key role in the country’s banking sector. It has a strong presence both domestically and internationally, with operations in Latin America and the Caribbean providing additional revenue streams beyond Canada. For income-focused investors, BNS is particularly appealing because of its consistent dividend payments and strong capital base.

In the fiscal year ending October 31, 2024, Scotiabank reported diluted earnings per share of $5.87, a slight increase from $5.72 the previous year. The bank maintained a return on equity of 10.2%, highlighting its stable profitability. However, it faced challenges in the fourth quarter of 2024, as higher taxes and increased expenses related to compensation and technology contributed to lower-than-expected profits. While this short-term weakness led to some investor concern, the bank’s long-term fundamentals remain strong.

Despite recent earnings pressures, Scotiabank continues to focus on strategic growth initiatives. Its emphasis on North American trade corridors, as well as efforts to streamline its Latin American operations, should support profitability moving forward. Additionally, with a dividend yield of over 5%, BNS provides investors with reliable income that can be reinvested for compound growth. Historically, Canadian banks have been some of the most resilient and well-regulated financial institutions in the world, making them a solid choice for conservative investors.

Bottom line

By allocating your TFSA funds to a combination of Exchange Income Corporation and Scotiabank, you can achieve a balance between income and growth. EIF offers high returns and strong dividend payouts, while BNS provides stability and a steady income stream. Together, they form a powerful duo that can turn a modest $12,000 investment into a long-term wealth generator. As dividends continue to roll in and are reinvested, the compounding effect will further enhance the value of your TFSA over time.

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 Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool recommends Bank Of Nova Scotia. The Motley Fool has a disclosure policy.

More on Dividend Stocks

up arrow on wooden blocks
Dividend Stocks

2 High-Yield Dividend Stocks You Can Buy and Hold for a Decade

Restaurant Brands International (TSX:QSR) and another high-yield dividend payer are worth banking on for the long haul.

Read more »

think thought consider
Dividend Stocks

Restaurant Brands International: Buy, Sell, or Hold in 2025?

Investors should look more closely at QSR stock and potentially buy on the recent weakness.

Read more »

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

Maximizing Returns with Your 2025 TFSA Contribution Room

The TFSA is a top tool for maximizing investment returns. Here are two stocks that could be a great buy…

Read more »

woman retiree on computer
Dividend Stocks

Should You Buy Telus Stock at $20?

Down 40% from all-time highs, Telus is a beaten-down TSX dividend stock that trades at a discount to consensus price…

Read more »

top TSX stocks to buy
Dividend Stocks

Here’s Exactly How $15,000 in a TFSA Could Grow Into $200,000

Canadians with sizeable TFSA balances today have utilized the full potential of the investment vehicle.

Read more »

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

The 1 Canadian Stock I’d Buy and Hold Forever in a TFSA

Don't get complicated. Consider this Canadian stock as a long-time buy.

Read more »

Man data analyze
Dividend Stocks

A Top-Performing U.S. Stock That Canadian Investors Really Should Own

This top US tech stock is something you cannot miss out on, and there’s another from Canada that you need…

Read more »

how to save money
Dividend Stocks

3 Premium TSX Dividend Stocks Worth Loading Up On

These three premium TSX dividend stocks remain among the best bets for long-term investors seeking stable total returns.

Read more »