Time to Employ Our 2023 TFSA Contribution Limit

January means TFSA contribution season. Many investors who pay attention to this registered account are fully aware that it’s contribution limit for 2023 has been increased to $6,500. Total contribution room since inception in 2009 is now $88,000. This is very welcome news for investors who considered this as their retirement account or for anyone who wants to park their money for short to mid term goals such as putting down deposit for a house, buying a car, emergency fund, or a vacation of a lifetime to avoid paying tax.

However, the ultimate benefit of TFSA in my opinion is to hold your investments inside your TFSA account for a long time either as a supplement to your pension or building your own pension from passive income if you are employed in companies that don’t contribute pension to their employees.

For this reason, we always get very excited every first week of January as it is the time that we can add to our TFSA accounts. It’s either you plan to contribute a lump sum $6,500 all in one go or spread it over the year by contributing every paycheck or monthly (dollar cost averaging) is a matter of choice and investors available resources. They key here is to start early and contribute consistently.

Many of my readers knew this is one goal we prioritize every year. We saved up for the contribution limit before the end of each year and contribute the full amount at the beginning of January each year which in this case $6,500 for 2023.

There are several options where you can invest your TFSA contribution such as a savings account, GIC, mutual funds, index funds or ETF or individual stocks in the stock market. In my opinion, the best bang for your hard earned money is to use it as a long term investment. We don’t use this registered account for any risky investments. In other words, we simply continue hold boring dividend growth stocks and small ETFs in our portfolio.

What we bought for our 2023 TFSA contribution?

There is no other secret strategy we implement. We continue to invest dividend growth stocks in our existing TFSA portfolio. We decided to pick these 5 companies to buy for our full contribution limit of $6,500 in each of our account.

• Royal Bank of Canada (RY.TO)

5 Year Ave. Dividend Yield = 3.82

Forward Annual Dividend Yield = 3.96%

Payout Ratio = 44.85%

• Bank of Montreal (BMO.TO)

5 Year Ave. Dividend Yield = 4.05

Forward Annual Dividend Yield = 4.36%

Payout ratio = 27.21%

• Toronto Dominion Bank (TD.TO)

5 Year Ave. Dividend Yield = 3.88

Forward Annual Dividend Yield = 4.35%

Payout Ratio = 37.59%

• Alimentation Couche-Tard (ATD.TO)

5 Year Ave. Dividend Yield = 0.65

Forward Annual Dividend Yield = 0.90%

Payout Ratio = 12.28%

• Waste Connection (WCN.TO)

5 Year Average Dividend Yield = 0.70

Forward Annual Dividend Yield = 0.80%

Payout Ratio = 29.39%

Source: Yahoo Finance

We own all 6 big banks in our portfolio but BMO, RY and TD with the addition of National Bank (NA) will continue to perform well and will provide further growth potential compared to CM and BNS in my opinion. Those 4 mentioned remain undervalued with a healthy, low payout ratio. We are confident they can to continue to deliver organic dividend increases in the future.

From the sector consumer cyclical (ATD) and industrials (WCN) are also two of our favorite low yield and high growth dividend stocks. Both continue to deliver double digit growth and dividend increases in the last few years hence they got the nod for our annual TFSA contribution.

Beyond these five mentioned, future dividends in our TFSA portfolio will be geared towards focusing on reinvesting also in companies that we currently own. Top of our lists will be railroad stocks Canadian National Railway (CNR) and Canadian Pacific Railway (CP), Telecoms Bell (BCE) and Telus (T) utility Fortis (FTS), pipelines Enbridge (ENB) and TC Energy (TRP).

The Good and the Bad

Over the last two years the best performer in my TFSA account is Loblaws (L) up 83% and the underperformer is Canadian Imperial Bank of Commerce (CM) down 12.3%. While my wife top performer Canadian National Railway (CNR) up 40% and we have similar underperformer (CM) down 8.2%. Although it’s down we will continue to hold (CM) and will add and reinvests our dividends. Also, sadly I own Algonquin Power and Utilities Corp (AQN) in my own account with the company’s struggle with high debt I sold all our positions at a loss in November of last year and move on to other opportunities. The eventual decision to cut dividends was probably the most prudent thing to do by the management. However, I am not certain that they can make a quick turn around in my opinion. Overall, we still did really well in our December 2022 TFSA Dividend Income tally.

Note: For transparency, I have started this blog with my commitment to post our TFSA dividend income only. We have already achieved our goals for this year- maxed out both our TFSA and RRSP contribution room. However, we continue to invest in our taxable accounts. We don’t have any intention to post the total value of our portfolio or personal net worth updates. Thank you for your understanding.

My Final Thoughts

In summary, we are now happy with our current TFSA holdings at around 23 each in our individual portfolio. However, we continue to evolve and be a better version of ourselves as an investors along the way. All in all, we may still continue to consolidate our positions depending on how these companies perform in the future.

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Moreover, you may be able to save and invest more if you sit down and review your finances at the start of this year. Following some of these simple tips might help you save or keep more of your hard earned money.

If you are still banking that require monthly fees or keep a sizeable minimum balance to avoid bank fees consider switching to a no fee, no minimum and maintaining balance bank account. Our favorite bank is Equitable Bank (EQB). This is where we bank and hold our cash. My Top Canadian daily bank account.

Similarly, if you are also planning to invest or already investing but still paying commission every time you trade, it will also erode the total return of your investments. Instead, consider switching to Wealthsimple zero trading brokerage.

In addition, if you are a homeowner or renter and your insurance is due for renewal consider getting a quote with Square One. We managed to save more than 30% on our first year switching to them. Comparatively, upon renewal last month, we shopped around but none was also able to beat their renewal quote therefore we remain to be happy customers. Apart from the huge savings you may also received a $20 credit if you decide to purchase the policy using my link. They are easy to deal with and available online or by phone. Give it try and cost you nothing to get a quote. You may end up getting a huge savings by switching to them.

Likewise, we also prefer to shop online rather than going to the mall or retail shop and use these cashback websites Rakuten and Great Canadian Rebate (GCR) rather than going straight to the merchant website. In doing so, we are also able to generate passive income by using this strategy of shopping on top of using our cashback credit cards. For this reason, we received regular checks or cash directly deposited to our accounts every few months. Please note when you sign up through GCR they may ask for the referral email which is saveapenny70@gmail.com.

Similarly, It is also a good idea to monitor your credit score regularly. According to Equifax Canada, a good credit score is usually 660-724 and 729-760 is very good. Above 760 is considered an excellent score. Having very good to excellent credit score means you have favorable chances of being successful to be approved for credit products such as car loans, mortgages, and credit cards. If you sign up with Borrowell then you can monitor your credit score 24/7 and it’s free. There is also a little hack, if you sign up with GCR first and search for Borrowell you will also received $2 cashback by using that route.

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