The Tax-Free Financial savings Account (TFSA) helps Canadians save and make investments all through their lifetimes. To many customers, the TFSA is the champion of compounding curiosity. As a result of curiosity, capital positive aspects, and dividends earned contained in the account are tax-free, you possibly can anticipate exponential cash progress.

As an illustration, should you absolutely make the most of your $7,000 TFSA restrict in 2025, the funding can develop to $50,000 over time. The repetitive technique of reinvesting the dividends or shopping for extra shares as a substitute of taking the money results in steady cash progress.

Dividend titan

Diversified Royalty Company (TSX:DIV) is a compelling choice for income-focused buyers. The small-cap inventory is a dividend titan. At $3.53 per share, present buyers have to date realized a 29.29% year-to-date achieve, on high of a 7.23% dividend yield. An added attraction is the month-to-month payout frequency, which implies you possibly can reinvest dividends 12 occasions a 12 months, not simply 4.

Assuming you make investments immediately, your $7,000 TFSA contribution will compound to $50,214.60 in 27 years. The interval could possibly be shortened to 12 years if the funding quantity is 3 times greater, which might be $21,000. The instance demonstrates how highly effective the TFSA is regardless of the annual contribution limits.

Enterprise overview

The $641.3 million royalty firm owns the emblems of a number of companies and collects royalties from corporations in its royalty pool. In Canada, its royalty companions embody Mr. Lube, Air Miles, Sutton, Mr. Mikes, Oxford Studying Centre, Nurse Subsequent Door, and BarBurrito. American franchisors Stratus Constructing Options and Cheba Hut full the roster.

Diversified Royalty has been round for 33 years. Its main goal hasn’t modified – buying predictable, rising royalty streams from a various group of multi-location companies and franchisors.

Finest income quarter

Diversified Royalty achieved its finest income quarter within the second quarter (Q2) of 2025. Within the three months ending June 30, 2025, the highest line elevated 6% to $19.2 million in comparison with Q2 2024. Notably, internet earnings within the first half of the 12 months rose 8.2% 12 months over 12 months to $17 million.

In keeping with Sean Morrison, CEO of Diversified, a lot of the royalty companions delivered sturdy ends in the second quarter. He mentioned including Cheba Hut because the ninth royalty companion in June broadened the corporate’s U.S. publicity and additional diversified the portfolio. Stratus, a franchisor in industrial cleansing and constructing upkeep, is a progress catalyst in each the U.S. and Canada.

Dividend historical past

Whereas Diversified Royalty’s progress prospects are promising, no funding is proof against market downturns and a possible recession. Through the international COVID‑19 pandemic in 2020, many corporations slashed or suspended dividend funds. Diversified Royalty maintained month-to-month money dividends, with solely a modest discount. This dividend titan hadn’t missed a month-to-month cost since November 2014.

Tax-free withdrawals

One other benefit of holding income-producing belongings inside a TFSA is that you simply pay zero taxes on withdrawals, together with dividend earnings. You may open a number of TFSAs, however your contribution restrict applies throughout all of them mixed. Don’t fear about not maximizing yearly limits. Unused TFSA contribution rooms carry ahead to the next 12 months.

With Diversified Royalty, you’d obtain tax-free passive earnings each month.