Turn a $50,000 TFSA Into $1.1 Million + $19,000 in Tax-Free Dividends for Life

money cash dividends

Investors should aim to leverage the power of compounding to build wealth over the long term. In the last 20 years, equity markets have managed to deliver inflation-beating returns to investors. For example, a $100,000 investment in the S&P 500 index in October 2022 would be worth $446,600 today. After adjusting for dividends, total returns would be closer to $660,000.

We can see how spending time in the market can help investors snowball their savings and derive compounded returns. While index investing is a solid option to create wealth over time, you can also look to buy and hold quality dividend stocks in your equity portfolio and earn a passive-income stream.

How to convert a $50,000 TFSA into $1.1 million

If you have $50,000 to invest, the ongoing market pullback offers an opportunity to buy quality stocks at a discount. You can identify companies on the TSX that are equipped with robust balance sheets and sustainable dividend payouts.

These dividends can be utilized to buy additional shares of the companies, which will result in higher payouts in the future, allowing you to convert a $50,000 investment into $1.1 million within 20 years.

If these stocks are held in a Tax-Free Savings Account, or TFSA, you can earn tax-free dividend income for life. Here are five such dividend stocks Canadians can buy right now and generate tax-free income in 2022.

Toronto-Dominion Bank

One of the largest banks in North America, Toronto-Dominion Bank (TSX:TD)(NYSE:TD), currently offers investors a dividend yield of 4.33%. An investment of $10,000 in TD stock 20 years back would be worth $123,000 today in dividend-adjusted gains.

In October 2002, investors could have purchased 625 shares of TD for $10,000. Given its current dividend of $3.56 per share, your annual dividend payout would be $2,225 today.

Brookfield Renewable Partners

One of the largest clean energy companies globally, Brookfield Renewable Partners would have turned a $10,000 investment into $231,000 in the last two decades. Investors could purchase 2,000 shares of BEP in October 2002 for $10,000. It now pays investors an annual dividend of $1.74 per share, translating to an annual payout of $3,480 for 2,000 shares.


The largest pipeline company in Canada, Enbridge has turned a $10,000 investment into $105,640 in the last 20 years. For $10,000, investors could have bought 872 shares of ENB, allowing them to generate $3,000 in annual dividends today.


The fourth dividend stock on my list is goeasy (TSX:GSY), a company that operates in the financial lending space. Despite its cyclical nature, GSY stock has returned a monstrous 4,170% to investors over a period of 20 years.

You could have brought 2,353 shares of goeasy for $10,000 in October 2002. Given its current dividend payout of $3.64 per share, annual dividends would be close to $8,565 today.

Brookfield Asset Management

The final dividend stock here is Brookfield Asset Management, one of the largest asset management companies in the world. Since October 2002, it has turned a $10,000 investment into $220,390. You could have purchased 2,293 shares of BAM for $10,000 in October 2002, allowing you to generate $1,742 in annual dividends today.

The Foolish takeaway

We can see an investment of $10,000 in each of these stocks in October 2022 would be worth $1.1 million today. Further, investors would also generate $19,000 in annual dividends in the next year, translating to a forward yield of 38% on the initial $50,000 investment.

Past returns should not matter much to investors. But investors can use this article as a starting point to identify similar companies with massive long-term potential.

The post Turn a $50,000 TFSA Into $1.1 Million + $19,000 in Tax-Free Dividends for Life appeared first on The Motley Fool Canada.

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Fool contributor Aditya Raghunath has positions in Brookfield Renewable Partners and ENBRIDGE INC. The Motley Fool recommends Brookfield Asset Management, Brookfield Asset Management Inc. CL.A LV, and Enbridge. The Motley Fool has a disclosure policy.