The tax-free savings account (TFSA) cumulative contribution limit as of 2026 is $109,000. Investors seeking to maximize their contributions can focus on high-yield stocks and/or high growth stocks to also maximize their returns. This maximizes the tax savings potential within the TFSA.
High-yield stocks are attractive options for an investor looking for income. Holding high-yield stocks in your TFSA provides tax-free income, which helps build wealth and income faster.
Vital Infrastructure Property Trust (TSX: VITL.UN) is an owner and operator of a diversified global portfolio of medical properties. This includes inpatient hospitals, medical outpatient centres, and diagnostic and imaging facilities. It’s also one of the top TFSA cornerstone stock picks.
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A high-yield stock
The risk/return tradeoff principle states that the higher the return potential of an investment, the greater the risk. Therefore, investors’ risk tolerance plays an important part in determining the appropriate level of potential return that one pursues.
Vital Infrastructure Properties is currently yielding 7%. It’s a high yield that’s enticing, but is it sustainable and is it safe? Let’s take a look at this in order to decide whether this TFSA stock offers investors an acceptable risk/reward trade-off.
Vital Infrastructure – A defensive business
The first point that I’d like to make is that Vital Infrastructure’s business is an inherently defensive one. Health-care properties have long-term leases, stable occupancy, government regulation, and inflation protection on their side. And it’s simply a defensive sector – we all need healthcare regardless of the economy. This all translates into steady and predictable cash flows.
Last year, Vital Infrastructure embarked on a new beginning. A new CEO and a strategic action plan are taking the company forward with a lower risk profile and increased efficiencies. The action plan consists of four pillars.
The first is to simplify and reduce Vital’s footprint. The second is to strengthen its balance sheet. The third is to reduce costs, and the last one is to practice disciplined capital allocation. This plan addresses all of the issues that were keeping Vital Infrastructure stuck in a downward spiral of survival.
The progress
So far this year, the action plan has been proceeding well. In Europe, the company closed the sale of the remainder of its European properties for $145 million. The proceeds were used to reduce debt and were redeployed into North America.
Additionally, this TFSA stock has made significant progress in deleveraging. In fact, the company’s debt-to-earnings before interest, taxes, depreciation, and amortization (EBITDA) ratio was reduced to 7.4 times from 9.4 times. Currently, Vital has liquidity of $443 million, which gives it flexibility to pursue accretive growth.
As far as costs go, good progress has been made here too. General and administrative expenses have fallen already and are expected to fall by more than 30% by year-end. Finally, in terms of capital allocation, Vital has acquired $153 million of properties that will immediately add to earnings.
Vital’s recent results
Recent results demonstrated steady operating performance with net operating income increasing 3.2% and adjusted free funds flow (AFFO) of $0.11 per unit versus $0.10 in the same period last year. The AFFO payout ratio is now 85%, and it continues to improve.
Finally, Vital’s occupancy stands at a strong and stable 96.4%, and its weighted average lease expiry is 13.1 years.
The bottom line
As a top TFSA cornerstone stock pick, Vital Infrastructure has a lot going for it. This high-yield stock provides steady cash flow, and the risks of this TFSA stock pick is mitigated by its defensive industry, inflation protection, and strong occupancy characteristics.
