Transform Your TFSA Into a Cash-Generating Machine With $10,000

Tax-Free Savings Accounts (TFSAs) are some of the best savings accounts available to Canadians. One of the main benefits of these accounts is that dividends earned inside a TFSA are tax-free. That tax-free income potential is just one advantage.

TFSAs also allow compounding to accelerate over longer periods of time. Canadians can contribute up to $7,000 to their TFSA in 2026.

As to what investment to buy in that TFSA, the market gives us plenty of great choices. Among those are the following three stellar investments to provide that tax-free income that lasts decades.

Investment #1: Enbridge

Enbridge (TSX:ENB) is an energy infrastructure behemoth that offers a mix of defensive appeal, reliable income, diversified business segments and a juicy quarterly dividend.

The company generates the bulk of its revenue from its pipeline segment. That business generates a defensive, recurring stream of revenue with volumes that help make it one of the most defensive picks on the market.

Enbridge also operates a growing renewable energy business as well as a natural gas utility operation. Collectively, all of Enbridge’s segments generate ample revenue for the company to invest in growth and pay a handsome quarterly dividend.

That dividend currently offers a yield of 5.88%. For investors looking to generate tax-free income, a solid $3,500 investment in Enbridge will provide an income of $205.

Prospective investors should note that it’s enough to generate a few shares each year through reinvestments, again, all tax-free.

And even better, Enbridge has provided annual upticks to that dividend for three decades without fail. The company also plans to continue that cadence, making this a top buy-and-forget pick for any TFSA portfolio.

Investment #2: Pembina Pipeline

Pembina Pipeline (TSX:PPL) has a similar pipeline-like appeal that Enbridge offers, but with a few key differences.

Pembina generates its revenue primarily from its pipeline business. That business, which is focused on Western Canada, includes both natural gas and hydrocarbon liquids. The company also has numerous gas and oil infrastructure facilities.

In many ways, Pembina operates like a toll road, charging customers for use of its extensive network. This not only insulates investors from the volatile price of oil but also offers some stability, which comes courtesy of long-term fee-based contracts.

That stable revenue stream allows the company to provide investors with a generous quarterly dividend. As of the time of writing, Pembina offers a yield of 5.07%.

For those investors seeking tax-free income from their TFSA, a $4,000 investment in Pembina will generate just over $200. Like Enbridge, that’s enough to generate several shares each year from reinvestments alone.

Pembina has also provided investors with annual bumps to that dividend, including after the company shifted from a monthly to quarterly payout in 2023.

Investment #3: Telus

The third stock to provide tax-free income for investors is Telus (TSX:T). Telus is one of Canada’s big telecom stocks, offering subscription-based options for wireless, wireline, TV, and internet services.

Those services are becoming increasingly defensive, which helps Telus generate a growing, recurring stream of revenue.

One of the main appeals that Telus offers is its quarterly dividend. As of the time of writing, Telus offers one of the highest yields on the market at 8.86%.

A caveat for prospective investors considering Telus comes in the form of dividend growth. The company paused its semi-annual dividend increase cadence recently. Telus did this to focus on reducing costs to offer a more sustainable payout.

For investors looking to allocate the final $2,500 of that initial $10,000 into a TFSA, that will provide an income of just over $220. That’s enough to generate nearly a dozen new shares from reinvestments alone.

Your tax-free income flow awaits

Investing in a TFSA is a superb way for Canadian investors to generate a long-term portfolio that can grow for decades tax-free.

With the correct investments, that portfolio can evolve into a growth machine. Using that initial $10,000 and the three stocks mentioned above, here’s how investors can build that self-growing portfolio.

CompanyInitial InvestmentRecent PriceNo. of SharesDividend Per ShareTotal PayoutFrequencyEnbridge$3,50065.9953$3.88$205.64QuarterlyPembina Pipeline$4,000$56.0271$2.84$201.64QuarterlyTelus$2,500$18.88132$1.67$220.44QuarterlyTotal Income$627.72 

The post Transform Your TFSA Into a Cash-Generating Machine With $10,000 appeared first on The Motley Fool Canada.

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More reading

• A 6% Yield Pipeline Stock That Could Have a Breakout Year
• 2 Canadian Dividend Stars That Are Still A Good Price
• 8.6% Yield? Here’s the Dividend Trap to Avoid in February
• Best Stock to Buy Right Now: Enbridge or TC Energy?
• 3 Dividend Stocks to Double Up on Right Now

Fool contributor Demetris Afxentiou has positions in Enbridge. The Motley Fool recommends Enbridge, Pembina Pipeline, and TELUS. The Motley Fool has a disclosure policy.