TFSA: How to Transform $10,000 Into $100,000!

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Last month, I’d discussed a little bit of TFSA history. Bringing your TFSA to $1 million is no easy task, but traders have managed to accomplish this goal over the past decade. It requires skill, opportunity, and a little bit of luck. Only a handful of investors are able to maximize the contribution room in their TFSA. For those who have contributed only a fraction of this total, there is still a great chance for you to build a nest egg. Today, we are going to look at how you can turn $10,000 into six figures over the next decade.

Leveraging growth and income

The two stocks that I will cover today offer a healthy mix of capital growth and income. During periods of broader market turbulence, stocks that pay out dividends are a fantastic boon. Going by yield alone, a $10,000 investment in the equities below would net investors approximately $600 in annual tax-free income. This is especially true when this income is tax-free, as it is in a TFSA. The two equities I will look at today are in two industries that are poised for continued growth into the next decade and beyond.

Extendicare

Extendicare (TSX:EXE) is an Ontario-based company that provides long-term care facilities. Senior citizens in Canada are set to make up roughly a quarter of the total population by 2031, according to Statistics Canada. The demand for facilities that cater to this growing demographic will squeeze the public and private sector in the coming years. Extendicare is well positioned to benefit from that rising demand.

Shares of Extendicare have climbed 41% in 2019 as of late-morning trading on December 19. The stock has achieved average annual returns of 5.8% over the past 10 years. In the first nine months of 2019, the company has posted revenue growth of 1.2% to $831.2 million. Adjusted EBITDA has fallen $3.6 million to $68.1 million. Earnings were dragged down primarily by higher administrative costs.

The stock was trading at the high end of its 52-week range at the time of this writing. Investors will want to see improvement in its earnings heading into the New Year, and the company has added a new client serving 4,000 customers in British Columbia. Extendicare offers a monthly dividend of $0.04 per share, which represents a strong 5.6% yield.

TransAlta Renewables

TransAlta Renewables (TSX:RNW) is a Calgary-based renewable power generation company. Its shares have climbed 53.6% in 2019 at the time of this writing. The stock has delivered average annual returns of 11% over the past five years. In combination with its dividend, this has made TransAlta a high performer for shareholders. Canada has made a commitment to boost its renewable power generation in the years to come, and TransAlta should be a beneficiary of this push.

The company released its third-quarter 2019 results on November 6. In the year-to-date period, TransAlta has reported revenues of $327 million compared to $322 million in the prior year, while comparable EBITDA has climbed to $313 million over $296 million. Adjusted funds from operations per share have remained flat year over year.

Though the stock is trading close to its 52-week high, it still possesses a price-to-earnings ratio below 20 and a price-to-book value of 1.7. TransAlta also offers a hefty monthly dividend payout. It last declared a monthly distribution of $0.07833 per share, which represents a tasty 6.2% yield.

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Fool contributor Ambrose O’Callaghan has no position in any of the stocks mentioned. The Motley Fool recommends EXTENDICARE INC.