Transforming your Tax-Free Savings Account (TFSA) into a cash-generating machine with $10,000 doesn’t have to be complicated. One of the best ways to do this is by investing in high-quality dividend stocks that offer both stable income and long-term growth potential. Capital Power (TSX:CPX) is one such stock that stands out. As one of Canada’s leading independent power producers, the company operates a diversified portfolio of electricity generation assets across North America. With a strong history of dividend growth, a commitment to clean energy initiatives, and a steady business model, CPX is an attractive option for TFSA investors looking for reliable, tax-free income.
The numbers
Capital Power made significant strides in strengthening its financial position while expanding its clean energy footprint. The company recently reported its third-quarter 2024 earnings, showcasing adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $401 million. This was slightly down from $414 million in the same quarter the previous year. Yet, it still highlights the company’s ability to generate strong cash flow despite market fluctuations. Net income attributable to shareholders came in at $179 million, translating to basic earnings per share of $1.32. While there was a modest year-over-year decline in earnings, the company remains financially solid, supported by its long-term contracts and predictable revenue streams.
One of the biggest reasons why CPX is an attractive TFSA investment is its strong and growing dividend. In July 2024, Capital Power increased its annual dividend by 6% to $2.61 per share. Thus reinforcing its commitment to returning value to shareholders. This increase continues the company’s streak of consistent dividend growth. This makes it particularly appealing to long-term investors looking for a stable income stream. At its current share price of approximately $52.81, the stock offers a forward dividend yield of around 4.93%, making it a solid choice for income-seeking investors. The fact that these dividends can be received tax-free within a TFSA further enhances the appeal.
Think long term
Capital Power is also positioning itself for long-term success through its ongoing transition towards cleaner energy. A major milestone in this shift was the completion of the transition of its Genesee Generating Station away from coal. A move that aligns with Canada’s broader push toward reducing carbon emissions. In addition to this, the company is actively developing 10 new growth projects that will add 1.1 gigawatts of renewable and natural gas-fired generation capacity to its portfolio. These initiatives demonstrate Capital Power’s ability to adapt to changing industry trends and position itself as a leader in the future of energy.
While CPX presents an attractive opportunity, it’s important to recognize potential risks. The energy sector is subject to regulatory changes, fluctuations in power prices, and shifts in government policy regarding renewable energy incentives. Additionally, interest rates can impact the company’s cost of capital — particularly given its substantial level of debt. However, Capital Power has shown resilience in managing these risks. And its long-term contracts provide a degree of stability that helps mitigate some of these challenges.
Earning income
So, how much could investors gain in their TFSA with a $10,000 investment in CPX? Let’s take a look.
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY | TOTAL INVESTMENT |
| CPX | 53 | 189 | $2.61 | $493.29 | quarterly | $10,000 |
Despite some short-term earnings fluctuations, the long-term investment case for CPX remains compelling. The company’s steady expansion in clean energy, disciplined financial management, and commitment to dividend growth make it a strong candidate for those looking to build a reliable, tax-free income stream. As the energy transition continues, CPX’s mix of natural gas, wind, solar, and battery storage assets positions it well for future growth.
Bottom line
For investors looking to maximize their TFSA’s potential, Capital Power offers the perfect blend of stability and income growth. The company’s strong financials, attractive dividend yield, and strategic investments in cleaner energy make it a standout choice for a long-term portfolio. With $10,000 invested in CPX today, investors can sit back and watch their TFSA generate a steady stream of cash year after year, all while benefiting from tax-free growth.