Canadian investors can use the Tax-Free Savings Account (TFSA) to buy and hold high-quality dividend growth stocks such as blunt (TSX:GSY). In general, an expanded base of cash flow and earnings allows dividend-paying companies to increase their payouts each year. In addition to a steady stream of recurring income, dividend growth stocks should also help you build wealth via capital gains, both of which are tax-free.
The TFSA contribution room has increased to $7,000 in 2024, bringing the maximum cumulative contribution limit to $95,000. Let’s see how you can use $7,000 in goeasy shares to earn $1,804 in tax-free passive income next year.
Why should you invest in goeasy shares?
With a market cap of $3.08 billion, goeasy is part of the cyclical lending sector. However, it has easily outperformed its peers over the past two decades, returning close to 3,500% in dividend-adjusted gains since August 2004.
goeasy is focused on building and expanding Canada’s non-prime consumer lending business. In the past 33 years, it has originated $14.3 billion in loans to 1.4 million customers. It uses risk-based pricing to upgrade its customers, lowering their interest rates and borrowing costs.
Despite a sluggish macro environment and headwinds such as the COVID-19 pandemic, inflation and rising interest rates, goeasy has delivered an average return on equity of 26.4% over the past five years.
goeasy has established strong credit and underwriting practices to prudently manage risk, enabling the company to report stable credit performance across market cycles. It maintains a strong balance sheet with diversified funding sources, resulting in significant funding capacity to execute its growth initiatives.
goeasy’s growth story is far from over. It is in the early stages of product, channel and geographic expansion, and it plans to grow its consumer loan portfolio to $4 billion by the end of 2024.
Strong performance in Q2 2024
Since 2013, goeasy has grown
- Revenue by 19% annually;
- Net income by 33.3% annually; and
- Adjusted earnings by 28.8% annually.
In the second quarter (Q2) of 2024, goeasy generated a record $827 million in loan originations, up 24% year over year, as credit applications grew 34% in the last 12 months. goeasy explained that the growth was linked to strong performance across product and acquisition channels, which include unsecured loans, home loans, car finance and point of sale.
It ended Q2 with a consumer loan portfolio of $4.14 billion, up 29%, allowing the company to increase sales by 25% to $378 million.
Its Q2 operating income grew 33% to a record $147 million, indicating an operating margin of 39%, up from 36.5% last year. Its adjusted net income rose 27% to $71.3 million, or $4.10 per share.
How can you earn $1,804 by investing in GSY shares?
Analysts expect revenue to increase slightly by 21.8% to $1.55 billion and earnings by 19.4% to $16.97 per share. target estimates.
| COMPANY | LATEST PRICE | NUMBER OF SHARES | YIELD | CAPITAL INVESTMENTS | TOTAL RETURN |
| blunt | $183.79 | 38 | $178 | $1,626 | $1,804 |
An investment of $7,000 in GSY stock will help you buy 38 shares of the company. If the stock reaches its target price of $227, your investment will be worth $8,626 over the next 12 months. Furthermore, dividend payouts should be close to $178 during this period, increasing your total potential return to $8,804.