The tax -free savings account, or TFSA, has been offering investors tax -free profits and income since 2009. In this time frame, the cumulative contribution limit has increased to $ 102,000. This means that there are many tax savings available. So, wherever you are on your TFSA trip, I would recommend MAXEN this contribution space as quickly as possible. You can do this with the help of a monthly dividend powerhouse such as Northland Power (TSX: NPI).
Let us investigate the investing merits of these 5.2%hunting shares.
TFSA Tax savings
It is a few years since guaranteed investment certificates (GICs) have yielded 5%. And even when they did that, this was short -lived. Nowadays GICs are usually in the range of central 3%. The proceeds from Northland Power are well above this reach, giving shareholders a very attractive dividend income stream.
Let’s assume that you invest $ 30,000 in Northland Power shares. This would give you a monthly dividend income of $ 130, or annual dividend income of $ 1,560. But the benefits do not end there. Because you buy Northland within your TFSA, this amount, together with any capital profits, is tax -free.
Is Northland Power due to a dividend increase?
Since December 2017, the monthly dividend payment of Northland has been kept at $ 0.10 per share. This has been a function of the capital -intensive utility company in which Northland is located. The debt balance of the company has had to be carefully managed before dividends can be paid and/or increased. It is also a function of the amount of new large projects in which Northland has invested in these years.
For example, Northland’s Hai Long Offshore Wind project in Taiwan has been under construction since 2017. The Baltic Power Wind Farm project in Poland has also been under construction since 2023.
The good news is that these projects are almost complete, with Hai Long on schedule for full commercial operation by 2027 and Baltic Power is expected to be commercial operation in 2026. These projects arrived in the budget and on schedule and are expected to generate significant cash flows that will start in the coming years.
These projects also further diverse the sales and cash flows of Northland, which reduces the risk of financial results and of the shares. They increase the size and scale of Northland and place it in a position to ultimately increase its dividend.
Look forward
The guidelines of management for adjusted income before interest, taxes, depreciation and amortization (EBITDA) in 2025 is $ 1.3 billion to $ 1.4 billion. This means an increase of between 3% and 11%. As we go 2026 and 2027, EBITDA gets an extra boost of around $ 600 million of the new projects above the normal organic growth rate of the company. Cashflow also gets an extra boost from the new completed projects.
Northland is still working on reducing its debt. This task will also be easier with the completion of the new projects. In 2021, the long -term debt of Northland peaked with more than $ 7 billion. Today the company has succeeded in reducing this debt level to $ 6.1 billion.
The Bottom Line
I think the image looks clear in the long term for this monthly dividend energy shares. Tax protection in your TFSA is a good strategy to maximize your income and returns.
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