Yahoo Finance How to Use a TFSA to Create $4,846.08 in Passive Income for Life!
Written by Amy Legate-Wolfe at The Motley Fool Canada
For Canadians looking to grow a significant portfolio, the Tax-Free Savings Account (TFSA) is one of the best tools available. With a TFSA, your investments can grow tax-free, meaning gains, dividends, and interest aren’t taxed when withdrawn. In 2024, the annual contribution limit is $7,000. With cumulative room from previous years, many Canadians can contribute up to $95,000 if they haven’t maxed out contributions yet. This powerful compounding effect, combined with tax-free growth, makes the TFSA a great choice for long-term wealth building. So, let’s get started!
Where to invest
goeasy (TSX:GSY) is a strong option for TSX investors. The company, which specializes in providing non-prime consumers with access to credit, has experienced impressive earnings growth. For the second quarter of 2024, goeasy reported revenue growth of 15.4% year over year, demonstrating its ability to navigate economic challenges. Jason Mullins, president and chief executive officer of goeasy, remarked, “We continue to benefit from a large addressable market, strong execution, and the expansion of our product offering, which together drove solid performance this quarter.” This combination of steady growth and market opportunity makes goeasy a compelling investment.
goeasy’s financial performance has been nothing short of remarkable. The company boasts a trailing price-to-earnings (P/E) ratio of 11.39 and a forward P/E of 8.61, thereby indicating that the stock is currently trading at a reasonable valuation given its growth prospects. Its 17.7% quarterly earnings growth, paired with a return on equity of 25.28%, shows that management has effectively used capital to generate strong returns. The company’s market capitalization sits at $2.94 billion as well. With a dividend yield of 2.63% at writing, goeasy provides a solid income stream for investors alongside growth.
Yet still valuable
From a value perspective, goeasy remains an attractive option. The stock is trading at a price-to-book ratio of 2.57, suggesting that it is reasonably priced relative to its net assets. Its enterprise value is $6.11 billion, with an enterprise value/revenue ratio of 4.38, showing a fair valuation when considering the company’s revenue generation. Furthermore, the company’s five-year average dividend yield of 2.38% has been steadily increasing, rewarding shareholders over time.
The company’s ability to generate strong profits while maintaining a manageable level of risk makes it a valuable long-term hold. With a profit margin of 33.40% and an operating margin of 43.11%, goeasy has demonstrated that it can operate efficiently even in challenging market conditions. While goeasy has a high debt-to-equity ratio of 289.31%, it also maintains a healthy cash reserve of $225.88 million. This helps balance its financial position. The stock has shown resilience, with a 52-week increase of 44.21%. For investors seeking both growth and income, goeasy’s combination of solid financials, steady dividends, and potential for future growth makes it a strong choice.
Bottom line
So, how can we earn that income? Let’s say you put $20,000 towards goeasy stock. You then continue to see it rise by its compound annual growth rate of 22% in the last decade. Add in the dividend, and here’s what one year could look like!
COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY | PORTFOLIO TOTAL |
GSY – now | $178 | 112 | $4.68 | $524.16 | quarterly | $20,000 |
GSY – 22% | $217.16 | 112 | $4.68 | $524.16 | quarterly | $24,321.92 |
Now, you’ve added $4,321.92 in returns and $524.16 in dividends, totalling $4,846.08! In summary, goeasy stock presents a compelling opportunity for Canadian investors looking to grow their wealth within a TFSA. With strong earnings momentum, an attractive dividend yield, and a solid track record of profitability, goeasy has proven to be both a growth and income stock. It’s well positioned for long-term value, making it a great addition to portfolios aiming for a mix of stability and growth.
The post How to Use a TFSA to Create $4,846.08 in Passive Income for Life! appeared first on The Motley Fool Canada.
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Fool contributor Amy Legate-Wolfe 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.
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