Wednesday, June 4, 2014

2014 TFSA Contribution

Ahh the TFSA. Arguably the only good thing to come out of an organized government assembly. If you’ve been following TLB for any length of time, you may have noticed that the TFSA is my favourite choice as far as investment vehicles go. I mean, who wouldn’t want their investments to grow completely tax-free and can be withdrawn anytime without penalty as long as you don’t over contribute in one year?!

Since I hold my TFSA in such high regard, I tend to be a stickler with what gets invested within it. I’m only looking for high quality dividend paying common shares with a proven track record for dividend growth. No fly-by-night companies on the cusp of kyboshing their dividend and no flavour of the months either! I don’t need any wrenches thrown in the gears of my highly tuned, well oiled money making machine, thank you very much!

And the winner is…

After spending months and month analyzing data from quarterly reports and condensed charts to find the perfect investment for my TFSA, I came to the conclusion that I was making it more complicated than it had to be. I wanted a stock that was a solid company, had a good track record for dividend increases and had a decent yield. So naturally I chose a stock that has done very well for me in the past and…well… just bought some shares of TD.

TD had just finished splitting when I nabbed some shares and so far its been doing well. Looking at the chart below we can see TD has had a fairly good dividend track record, save the global financial fiasco of the 2000s..es…zz?:

TD2014

Adjusted for the 2 for 1 split

Investing in Canadian banks for me is a no brainer. Every quarter they seem to post billion dollar profits and I get a taste of it every three months. My plan going forward is to buy Canadian bank stocks whenever they are attractively priced to me each and every year. I’m not going to exclusively buy bank stocks outright, but I’m going to add to my holdings when the time and price is right for me.

It’s all about the Dividends

Money Sense magazine had an article a while ago about Canadians who had large sums of money in their TFSA because of investments. Well, investing should never be a pissing contest because all you end up doing is looking ridiculous with urine all over your shoes. I have over $45,000 in my TFSA and I’m quite happy for that but I’m not after large figures. My goal is to create a stream of tax-free income from my TFSA that I can withdraw at anytime, without penalty or counting towards my income if I ever get to collect government benefits.

Unless the financial world turns up side down, this year I stand to collect well over $1500 in dividend income within my TFSA. That’s a trip to somewhere warm or a very nice flat screen TV. Instead of spending that money like a fool, I will buy more shares of dividend paying stocks, which will bring in even more dividends the following year. If I continue with this investment strategy, the dividends will slowly snowball into a sizable sum of income when I decide to retire.

If I happen to need some emergency funds when something goes wrong, I can easily withdraw money from my TFSA with one phone call to my online broker. The funds get transferred to my regular bank account before I even hang up the phone and I’m good to go. I then keep track of exactly how much money I did withdraw and re-contribute it the following year along with the $5500 yearly TFSA contribution limit.
 Care to share what you put in your TFSA for 2014?

This article was written by The Loonie Bin. If you enjoyed this article, please consider subscribing to his feed.

1 comment:

  1. Love me some TD as its one of my core holdings. My fave Canadian bank by far. Dividend a lil low compared to the big six but it has tonnes of room to grow.

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