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

A Tax-Free Savings Account (TFSA) is one of the most powerful tools available to Canadian investors. And most people aren’t using it to its full potential.

Here’s the idea: instead of parking cash in a savings account earning next to nothing, you can fill your TFSA with quality dividend stocks. If you pick the right stocks, they pay you cash, month after month, year after year, completely tax-free.

Over time, reinvesting those dividends compounds your wealth in a way that a regular savings account cannot match.

With $25,000 to deploy, two Canadian stocks stand out as compelling building blocks for a cash-generating TFSA: Alaris Equity Partners Income Trust (TSX:AD.UN) and Enghouse Systems (TSX:ENGH). Here’s why both deserve a spot on your radar.

The bull case for the TSX dividend stock

Alaris isn’t your typical private equity firm. It doesn’t take board seats and does not chase tech startups or turnaround stories.

Instead, Alaris provides alternative financing to private businesses, mostly family- or individually-controlled companies in stable, non-cyclical industries like business services, healthcare services, distribution, and construction. In exchange, it collects royalties and distributions. That cash flows back to investors as dividends.

The model is built for consistency. And right now, it’s firing on all cylinders.

Alaris just delivered a record third quarter. Net book value per unit hit $25.10, up 6% from the previous quarter. Earnings per unit came in at $1.90, another company record.

Year to date, total capital deployed reached approximately $228 million. CEO Steve King said on the call that Alaris will “shatter” its previous deployment record in 2025 and that the outlook heading into 2026 “remains very strong.”

The portfolio itself is healthy. Nineteen of 21 partners are performing at or above expectations. The weighted average earnings coverage ratio is 1.5 times, and 13 of 21 partners carry either no debt or less than one times senior debt to earnings before interest, taxes, depreciation, and amortization (EBITDA).

Alaris ended Q3 with a payout ratio of 48%, below its target range of between 65-70%. A low payout ratio gives Alaris the flexibility to hike dividends in the near term.

For income investors in a TFSA, Alaris offers a high-yield, tax-free distribution backed by a diversified portfolio of private businesses with strong cash flow coverage.

Today, the TSX dividend stock offers shareholders an attractive yield of almost 6.5%.

Is this TSX tech stock a good buy?

Enghouse is a Markham-based software company that develops enterprise software in two main areas: contact center and interaction management (through its Interactive Management Group) and transportation, network, and public safety solutions (through its Asset Management Group). It serves clients across financial services, telecom, healthcare, transit, and government.

For fiscal 2025 (ended in October), revenue totaled $498.9 million. Recurring revenue, from software-as-a-service (SaaS) and maintenance contracts, accounted for almost 70% of total sales. Adjusted EBITDA for the year was $127.6 million, representing a 25.6% margin.

Enghouse ended 2025 with $269.1 million in cash and zero external debt. The company returned $61.8 million to shareholders through dividends in 2025, a 16% increase over the prior year, and repurchased $14.7 million in shares.

With a 7% yield, Enghouse remains an attractive buy, given that recent restructuring efforts should expand free cash flow margins.

The Foolish takeaway

Split $25,000 between Alaris and Enghouse inside a TFSA, and you have a foundation built on recurring cash flow, disciplined management teams, and dividend growth potential.

That’s how a TFSA becomes a cash-gushing machine.

The post Got $25,000? Transform a TFSA Into a Cash-Gushing Machine appeared first on The Motley Fool Canada.

Should you invest $1,000 in Alaris Equity Partners Income Trust right now?

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More reading

• 1 Undervalued TSX Stock Down 50% to Buy and Hold
• 2 Top Canadian Dividend Stocks to Buy on a Pullback
• 1 Ideal TSX Dividend Stock, Down 36%, to Buy and Hold for a Lifetime
• A Perfect TFSA Stock: A 6.7% Yield With Constant Paycheques
• 5 Stocks for Canadian Dividend Investors

Fool contributor Aditya Raghunath has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Enghouse Systems. The Motley Fool recommends Alaris Equity Partners Income Trust. The Motley Fool has a disclosure policy.