Transform Your TFSA Into a Cash Cow With $7,000

Yahoo

11 hours ago

Written by Amy Legate-Wolfe at The Motley Fool Canada
Investing $7,000 in your Tax-Free Savings Account (TFSA) and turning it into a cash-generating machine doesn't require chasing trends. A focused and balanced mix of dividend and value stocks can work wonders. With that in mind, here's how I'd allocate your money across three solid TSX names. Those will be Fairfax Financial (TSX:FFH), Manulife Financial (TSX:MFC), and WSP Global (TSX:WSP). These strike a balance between income, growth, and diversification. But let's stay grounded — no overpromising here.
First, Fairfax Financial. It's a diversified holding company rooted in insurance and asset management. Fairfax currently trades around $2,462 per share as one of the market's deeper-value names, but you're not here for the dividend pump. Its annual payout yields just 0.875%, making it a slow-burn value play rather than a cash machine. In a TFSA, that value growth is just as valuable, even with less immediate income. But you have to be patient, returns here compound slowly and are tied to the performance of its investments and insurance underwriting results.
Next, Manulife. Manulife shares last changed hands at $41.50. It reported core earnings of $7.2 billion in 2024, up 8%, and maintains a conservative payout ratio of nearly 42%. Its annual dividend works out to 4.22% at writing, providing a dependable income stream without veering into yield traps. Its Asia business is growing fast, and wealth management is taking off too. But insurers also carry sensitivity to interest rates and capital markets, so you need to watch economic conditions closely.
Finally, WSP Global. It's a global engineering and professional services firm trading near $281.50 per share. This isn't an obvious dividend stock; it yields only around 0.54%, or around $1.50 per share annually. Instead, its strength lies in consistent earnings growth and backlog expansion. In the first quarter of 2025, WSP beat expectations, its backlog grew, and analysts remained bullish. Analysts recently raised their estimates. Acquisitions like Ricardo in the U.K. also support global scale. Earnings growth may not generate big monthly cash, but reinvested returns can compound nicely in your TFSA.
Here's how I'd divide the $7,000. Put $2,000 into Manulife to collect yield and income right away. The remaining $5,000 gets split between Fairfax and WSP. With Fairfax, you're buying value; you sacrifice immediate income for long-term gains. With WSP, you get global engineering exposure and rely on capital appreciation rather than dividends.
COMPANY
RECENT PRICE
NUMBER OF SHARES
DIVIDEND
TOTAL PAYOUT
FREQUENCY
TOTAL INVESTMENT
MFC
$41.64
48
$1.76
$84.48
Quarterly
$1,999.68
FFH
$2,462.39
1
$21.59
$21.59
Quarterly
$2,462.39
GSY
$281.55
7
$1.50
$10.50
Quarterly
$1,970.85
This mix gives you immediate yield from Manulife, value growth from Fairfax, and growth engine exposure via WSP. Over time, as Manulife pays dividends, those earnings can either fund living expenses or be reinvested to grow the capital base further. Meanwhile, money in Fairfax and WSP can compound tax-free in your TFSA.
But let's be clear: no single strategy is foolproof. Insurers can suffer in market downturns. Fairfax's earnings depend on investment results and underwriting quality. WSP could see delays in infrastructure projects or setbacks in merger and acquisition integration. All come with execution and macro risks.
Still, combining yield, value, and growth creates a well-rounded TFSA portfolio. You earn income now, while giving your TFSA room to appreciate over time. And if markets drop, your diversified selection offers different recovery paths. That makes it more resilient than chasing one shiny stock.
At the end of five years, your goal is modest but meaningful: generate income from Manulife, build value in Fairfax, and ride global growth with WSP. All inside a tax-free wrapper, of course. That's how $7,000 can transform into a cash-creating machine. It's not glamorous, but it's disciplined, tax-efficient, and tailored to real-world investor needs.
The post Transform Your TFSA Into a Cash Cow With $7,000 appeared first on The Motley Fool Canada.
Motley Fool Canada's market-beating team has just released a brand-new FREE report revealing 5 "dirt cheap" stocks that you can buy today for under $50 a share.
Our team thinks these 5 stocks are critically undervalued, but more importantly, could potentially make Canadian investors who act quickly a fortune.
Don't miss out! Simply click the link below to grab your free copy and discover all 5 of these stocks now.
Claim your FREE 5-stock report now!
More reading
10 Stocks Every Canadian Should Own in 2025 [PREMIUM PICKS]
Market Volatility Toolkit
A Commonsense Cash Back Credit Card We Love
Fool contributor Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Fairfax Financial. The Motley Fool recommends WSP Global. The Motley Fool has a disclosure policy.
2025