Transform Your TFSA Into a Cash-Creating Machine With $15,000 #CanadaFinance

Written by kay ng at the motley fool canada

A Tax-Free Savings Account (TFSA) is one of the most powerful tools available to eligible Canadians looking to grow their wealth. But beyond simply saving, you can transform your TFSA into a cash-generating powerhouse by investing in dividend stocks. With an investment of $15,000, you could create a reliable income stream that grows over time. Here’s how.

The Canadian stock market has delivered a remarkable return of nearly 20% over the last year, though this is considered to be an exception. Historically, the 10-year average return for the market has been about 8.8%. While it might seem wise to wait for a market correction before investing, if you’re ready to make your move now, there are solid dividend stocks trading at good valuations. Investing strategically can help you turn your $15,000 into a cash-creating machine.

One stock that could be a strong contender for your TFSA is Power Corporation of Canada (TSX:POW). This holding company has diverse interests across financial services, insurance, and asset management, providing you with exposure to multiple sectors. Power Corp. has proven its worth over the years, with a 10-year average return of nearly 10%, and it pays out a market-beating dividend. Currently, the company offers a dividend yield of 4.5%, significantly higher than the Canadian market’s 2.8%.

At the time of writing, Power Corp. is trading at $50.44 per share, and analysts have a near-term price target of $51.81, suggesting it’s fairly valued. With investments in strong businesses like Great-West LifecoPower Corp. is well-positioned to continue growing. If you were to invest $7,500 in Power Corp., you could expect to earn about $337 annually in dividends. Plus, Power Corp’s commitment to increasing dividends means you could see even higher payouts in the near future, with a potential dividend hike coming up next month.

Another attractive stock to consider is Bank of Nova Scotia (TSX:BNS), one of Canada’s oldest and most reliable dividend payers. With a history of paying dividends every year since 1833 and having maintained or increased them for at least 50 years, Scotiabank is a solid choice for long-term income investors. The stock has recently dipped 13% from its 52-week high, which presents an opportunity to buy at a discount.

At its current price of $69.70 per share at writing, Scotiabank offers a stunning dividend yield of 6.1%, more than double the market’s yield. Analysts believe the stock is trading at a 12% discount, making it an appealing option in a market that’s been trending upward. With a $7,500 investment in Scotiabank, you could earn around $456 in dividends annually. This steady income stream, combined with the bank’s potential for long-term growth, makes Scotiabank a prime candidate for your TFSA.