Got $25,000? Transform Your TFSA Into a Cash-Gushing Machine

If you’ve got $25,000 sitting in your Tax-Free Savings Account (TFSA), there’s a way to turn it into a reliable source of passive income. By investing in strong mid-cap dividend stocks, you can generate steady cash flow while still benefiting from long-term growth. Two stocks that fit the bill are Savaria (TSX:SIS) and Chemtrade Logistics Income Fund (TSX:CHE.UN). These companies operate in very different industries, but both offer a compelling combination of dividend income, financial strength, and future potential.

Savaria

Savaria is a leader in accessibility solutions, manufacturing home elevators, stairlifts, and patient care equipment. With an aging population and increasing demand for mobility solutions, Savaria has positioned itself as a key player in this growing market. In its most recent earnings report for the third quarter of 2024, the company posted revenue of $213.6 million — a 1.7% increase from the previous year. More impressively, its gross profit grew by 9% to $79.1 million, showing that the company is managing its costs effectively while increasing its sales. Earnings per share (EPS) for the trailing 12 months came in at $0.65, with quarterly earnings growing by 8.1% year over year.

Savaria has also set ambitious goals for the coming years, aiming to reach $1 billion in revenue by 2025, with a 20% adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) margin. The company’s “Savaria One” initiative, which focuses on streamlining operations and improving efficiency, is expected to drive further profitability. With a dividend yield of approximately 2.96%, Savaria not only provides investors with a steady income. It also offers significant room for capital appreciation as its business continues to expand.

Chemtrade

Chemtrade operates in a completely different sector but presents just as compelling an opportunity. The company supplies industrial chemicals and services essential to water treatment, energy production, and manufacturing. While demand for its products fluctuates slightly with economic conditions, its core business remains strong as many of its chemicals are necessary for industries to function. In its third-quarter earnings report, Chemtrade reported revenue of $474.2 million, which represented a slight decline of 1.9% from the previous year. However, its adjusted EBITDA remained solid at $137.2 million — only 3.5% lower than the record-setting quarter in 2023.

Despite minor revenue softness due to a Canadian railway work stoppage that temporarily impacted logistics, Chemtrade remains a cash-generating powerhouse. The company maintains a strong balance sheet with a net debt-to-adjusted EBITDA ratio of 1.8 times, indicating financial stability. More importantly, for income-focused investors, Chemtrade pays an attractive dividend, offering a yield of 5.72%. With a payout ratio of 57.27%, the company appears well-positioned to sustain its dividend, making it an appealing choice for investors looking for tax-free income in their TFSA.

Split it up!

For someone investing $25,000, splitting it equally between Savaria and Chemtrade could create a powerful income-generating portfolio. Savaria’s dividend, at a forward annual rate of $0.54 per share, would generate approximately $370 annually, while Chemtrade’s higher-yielding $0.66 per share dividend would bring in about $815 per year. Combined, that’s over $1,000 in tax-free income from dividends alone. With the potential for long-term stock price appreciation!

Both companies operate in industries with long-term tailwinds. Savaria benefits from the aging population and increased accessibility needs, while Chemtrade’s chemical products are essential for infrastructure and industrial processes. These factors make them resilient businesses capable of withstanding economic downturns and continuing to provide consistent income for shareholders.

Of course, no stock is without risk. Savaria has a relatively high payout ratio of 80.2%, meaning it reinvests less into future growth. If earnings slow, dividend growth could be limited. Chemtrade, while offering a strong dividend yield, carries a high debt-to-equity ratio of 128%, making it more sensitive to interest rate increases. However, both companies have demonstrated strong financial management and steady cash flow, which helps mitigate these concerns.