U.S. Stocks in Your TFSA: What You Need to Know

The Tax-Free Savings Account (TFSA) is a powerful tool for Canadians to build wealth. One way to diversify your TFSA portfolio is by investing in U.S. stocks, which provide exposure to global leaders across various sectors.

However, there's an important consideration to understand: the 15% withholding tax on dividends paid by U.S. companies. This means that only 85 cents of a $100 dividend payment would reach your TFSA account.

Johnson & Johnson is one example of a quality dividend payer with a trade-off. While it's a well-known and respected business, its dividend from within a TFSA isn't as tax-efficient as some other Canadian dividend payers.

Nvidia, on the other hand, is a popular option for growth investors. Although it pays a small dividend, its immense growth potential makes up for the withholding tax issue. In fact, Nvidia has returned an 850% over the past five years.