TechnologyWhy your TFSA will fail to earn passive income
TFSA Investors: Make Over $300/Month in Passive Income by Investing in This 1 Stock
Plaza Retail REIT (TSX:PLZ.UN) is a great option for investors that are looking for a dividend stock with great payouts and a lot of stability.
The odds are that you will not earn passive income on your TFSA this year — or next. Here’s why.
A survey conducted by Royal Bank of Canada found that Canadians do not take full advantage of their Tax-Free Savings Accounts (TFSA). Instead of using their TFSAs to grow their income tax-free, Canadians store their savings at meagre interest rates. In fact, 42% of TFSA savings are not invested in mutual funds, stocks, or even risk-free Government-Insured Certificates (GICs).
Even if TFSA investors manage to diversify their holdings into stocks and exchange-traded funds, there is a learning curve involved in picking high-quality investments. The learning curve prevents many Canadians from even attempting to diversify outside of simple savings, mutual funds, and term deposits.
The best housing stocks to own right now
Slate Retail REIT (TSX:SRT.UN), True North Commercial Real Estate Investment Trust (TSX:TNT.UN), and Northview Apartment Real Estate Investment Trust (TSX:NVU.UN) are among the best and highest dividend-paying REIT stocks.
Related video: Why you should delay retirement [Provided Money Talks News]
If fear of trying doesn’t bring your TFSA down, your TFSA will ultimately fail to earn passive income through investments in low-return or poorly performing stocks. Here’s one stock you should not be afraid of buying into, and why it is a safe investment for your TFSA.
Thomson Reuters soared 44% the past 12 months
That’s right. TFSA investors who bought shares in Thomson Reuters (TSX:TRI)(NYSE:TRI) in September 2018 are now sitting on a 44% capital gain plus an 11.5% dividend yield for the year. At its current share price of $93.26, Thomson Reuters still offers a decent dividend yield of 2.05%, but it also comes with substantial risk for the uninformed investor.
Forget Your TFSA: 3 Ways Your RRSP Is Superior
There are certain situations where it is better to use your RRSP over your TFSA. Enbridge Inc. (TSX:ENB)(NYSE:ENB) stock, if purchased on the NYSE, could lead to more taxes in your TFSA.
The market now values the stock at a historic high. Before this surge, the stock’s other two peaks in the early 2000s and the summer of 2017 did not go above $66 per share. Buying a stock at record highs can be scary — so, should you take the risk and invest in Thomson Reuters? Will the stock undergo a downward correction, or are these gains sustainable?
The way to answer this question is to research the company’s announcements just before and after the share price began rising. In these press releases, you will likely find the reason behind why Thomson Reuters’s market valuation rose so high this past year.
Thomson Reuters returned US$10 billion to shareholders
On October 08, 2018, Thomson Reuters announced plans to distribute $10 billion to shareholders and increase the annual dividend to $1.40 per share. The board of directors reached this decision after finalizing the sale of 55% of its Financial & Risk (F&R) business.
TFSA Investors: How You Can Earn $500/Month With Less Than $100k
Loading up your TFSA with great dividend payers like Enbridge Inc. (TSX:ENB)(NYSE:ENB) and Capital Power Corp (TSX:CPX) will result in some serious income.
Besides the dividend increase, Reuters decided to return the proceeds of this sale to shareholders in three ways:
- US$6.5 billion issuer bid/tender offer around October 9
- US$2.5 billion cash distribution of $4.45 per common share and share consolidation
- US$1 billion share repurchases under normal course issuer bid
The stock rose in value because the supply of the stock decreased, and investment returns increased. Thomson Reuters is very generous with shareholders when it comes to dividend payouts and rewarding long-term investors for their loyalty. Thus, the rise in value is likely sustainable.
Thomson Reuters’s last reported profit margin is nearly 70%, and its diluted earnings per share is $6.65. Since the company is so profitable, TFSA investors should make a long-term commitment in the stock with the understanding that the company will take care of them.
Canadians who want to avoid common TFSA pitfalls should consider adding Thomson Reuters stock to their portfolio to begin the journey toward earning passive income.
TFSA Investors: 3 Safe Passive-Income Stocks Yielding up to 8.2%
Double down on Brookfield Renewable Partners LP (TSX:BEP.UN)(NYSE:BEP) and two other passive-income stocks.
Just one ticking time bomb in your portfolio can set you back months – or years – when it comes to achieving your financial goals. There’s almost nothing worse than watching your hard-earned nest egg dwindle!
That’s why The Motley Fool Canada’s analyst team has put together this FREE investor brief, including the names and tickers of 3 TSX stocks they believe are set to LOSE you money.
Stock #1 is a household name – a one-time TSX blue chip that too many investors have left sitting idly in their accounts, hoping the company’s prospects will improve (especially after one more government bailout).
Still, our analysts rate this company a firm SELL.
Don’t miss out. Click here to see all three names right now.
- 2 Dividend Aristocrats to Buy in September
- This $9,750 Income Stream Will Only Get Bigger in 2020
- 3 Stocks up +30% YTD That Are Still Hot Buys Today!
Fool contributor Debra Ray has no position in any of the stocks mentioned.
Related gallery: 23 reasons why retiring is harder than it used to be (Provided by Cheapism)
TFSA Investors: 2 Special Stocks to Boost Retirement Wealth and Income.
Bank of Nova Scotia (TSX:BNS) (NYSE:BNS) and a top telecom stock deserve to be on your radar right now.
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