Invest $7,000 in This Dividend Stock for $710.50 in Passive Income

In 2026, $7,000 is not a random figure; it has become a magic number for Canadians. The amount represents the annual Tax-Free Savings Account (TFSA) contribution limit since 2024. By maximizing this limit, TFSA users gain powerful financial advantages, notably tax-free money growth and non-taxable passive income.

While many associate “savings” with cash, the TFSA works best if you hold income-producing assets. The qualified investments include guaranteed investment certificates (GICs), government or corporate bonds, exchange-traded funds (ETFs), mutual funds, and stocks.

TFSA users choose their own holdings depending on their risk appetites and financial goals. If income generation is the primary objective, dividend stocks are logical choices.

Desirable option

PHX Energy Services (TSX:PHX) is ideal for dividend chasers and income seekers for its double-digit yield. At $7.88 per share, the small-cap stock pays a generous 10.2% dividend. Your $7,000 TFSA limit can purchase 888 shares and generate $710.50 in passive income. Since the payout frequency is quarterly, you’ll receive $177.63 every three months.

Cumulative contribution limit

The federal government introduced the TFSA in 2009. Each year, the Canada Revenue Agency (CRA) assigns an annual limit that is added to the total contribution room. Canadians aged 18 or older can open a TFSA. For those who were eligible to contribute since its inception, the cumulative limit as of January 2026 is $109,000.

Let’s assume your available TFSA contribution room is the maximum, or $109,000. You can purchase 18,832 shares of PHX. Given the same yield of 10.2%, the money will generate $11,063.50 in annual dividend income ($2,756.88 quarterly). As long as you don’t over-contribute, income inside your TFSA is tax-free.

Business overview

PHX Energy Services, through Phoenix Technology Services, provides horizontal and directional drilling services. The $356 million company operates in Canada, the U.S., and Albania, serving oil & gas companies. Allied services include Gyro and service management. In North America, PHX is the largest independent directional drilling provider and works for 18 of the region’s top 20 energy producers.

According to management, there’s a significant barrier to entry as companies must have ample financial resources and be able to develop technologies for a Tier 1 environment. PHX Energy is well-established and has achieved Tier 1 provider status. Its advanced drilling technology drives growth.

Latest financials

PHX Energy said its drilling technology created some resilience, notwithstanding a weaker industry environment and lower rig counts for most of 2025. Its technology fleet enables clients to achieve faster, more efficient drilling operations.

In the nine months ending September 30, 2025 (first three quarters), total revenue increased 9% to $525.7 million compared with the same period in 2024. However, earnings declined 8.3% year-over-year to $37.1 million. Earnings in Q3 2025 declined 16.7% year-over-year to $8.5 million due to continued softer industry conditions and lower commodity prices.

Top-tier directional provider

The risk level of PHX Energy leans toward the high side because of the business’s vulnerability to oil price fluctuations. Nonetheless, it has niche-market leadership with hardly any serious competition. Its directional drilling technology also makes it a technology play rather than a pure commodity play.

The post Invest $7,000 in This Dividend Stock for $710.50 in Passive Income appeared first on The Motley Fool Canada.

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More reading

• This 6.3% Dividend Stock Pays Cash Every Single Month
• 3 Risky Stocks That Could Send Your $100,000 Investment to $0
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• Top Canadian Stocks to Buy for Long-Term Wealth
• RRSP Investors: Here’s Where I’d Invest the Next $5,000 in 2026

Fool contributor Christopher Liew has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.