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

Investing $10,000 in top Canadian dividend stocks could help turn your Tax-Free Savings Account (TFSA) into a cash-generating machine. The key is to focus on companies with a long-standing track record of paying and growing dividends. TSX stocks backed by businesses with strong balance sheets, consistent cash flows, and resilient business models are far better-positioned to maintain their payouts through economic cycles.

Against this background, here are the top Canadian dividend stocks that are reliable investments to turn your TFSA into a cash-generating machine

TFSA stocks: Fortis

Fortis (TSX:FTS) is a no-brainer to turn your TFSA into a cash-generating machine. The utility company’s rate-regulated business and focus on power transmission and distribution help it generate stable earnings and cash flow, supporting consistent dividend growth.

Fortis has uninterruptedly increased its dividend for 52 years in a row. Given its defensive business model, regulated assets, and predictable cash flow, Fortis appears well-positioned to extend this dividend-growth streak well into the future.

A growth catalyst is Fortis’s $28.8 billion capital investment plan over the next five years. This program is primarily focused on strengthening and expanding transmission and distribution networks, as well as other critical infrastructure assets that earn regulated returns. Because the majority of these investments are related to regulated projects, earnings volatility is limited. At the same time, only a modest portion of the plan is allocated to large, complex developments, thereby improving execution certainty and reducing risk.

Thanks to its multi-billion-dollar capital plan, Fortis’s regulated rate base is projected to increase by about 7% annually through 2030. As the rate base grows, so does Fortis’s capacity to increase its earnings and dividends. Management has already indicated a target of 4% to 6% annual dividend growth through 2030. Moreover, its adjusted payout ratio remains well protected, making it a reliable income stock.

TFSA stocks: Bank of Montreal

Bank of Montreal (TSX:BMO) is another top TSX stock that can turn your TFSA into a cash-generating machine for decades. The financial services giant has a solid history of returning cash to its shareholders. The bank has paid dividends continuously for 197 years, a reflection of the resilience of its payouts.

Over the past 15 years, BMO has increased its dividend by about 5.7% annually. For long-term TFSA investors, this combination of reliability and growth can translate into a steadily rising stream of tax-free income.

BMO’s dividend payments are supported by its high-quality earnings base. Its diversified revenue model, high-quality assets, strong balance sheet, and focus on improving efficiency enable it to generate steady earnings, supporting its payouts.

Looking ahead, its digital-first strategy and investments in technology and AI will help modernize operations, deepen client relationships, and improve productivity. Over time, these initiatives should strengthen competitiveness and open up new avenues for growth.

Overall, BMO’s solid dividend payment history and strong earnings base make it a dependable income stock within a TFSA.

Earn over $350 in tax-free passive income

Fortis and Bank of Montreal are two top dividend stocks that can help turn a TFSA into a reliable source of cash flow. By investing $10,000 evenly between these two TSX-listed companies, TFSA investors could earn about $350.32 per year in tax-free income.

CompanyRecent PriceNumber of SharesDividendTotal PayoutFrequencyFortis$72.1969$0.64$44.16QuarterlyBank of Montreal$188.62261.67$43.42QuarterlyPrice as of 01/23/2025

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

• Set and Forget: The 4 Stocks That Can Kickstart Any Long-Term Portfolio
• Got $5,000? 5 Income Stocks to Buy and Hold Forever
• 3 Canadian Stocks With Ultra-Safe Dividend Yields
• The Smartest Dividend Stocks to Buy With $1,000 Right Now
• A Canadian Utility Stock to Buy for Big Total Returns

Fool contributor Sneha Nahata has no position in any of the stocks mentioned. The Motley Fool recommends Fortis. The Motley Fool has a disclosure policy.