How Canadian Couples Can Collect $750 Per Month in Tax-Free Passive Income

Here’s how dividend-growth stocks such as Power Financial Corp (TSX:PWF) can help you set up a passive-income portfolio in your TFSA.

Imagine having an extra $750 per month in cash without working more hours or taking on a weekend gig at the local pub.

It seems like a dream, but Canadian couples can take advantage of their existing TFSA contribution room to own quality dividend stocks and essentially start their pension early.

Since the launch of the Tax-Free Savings Account (TFSA) in 2009, Canadian residents that were at least 18 years old at the time now have a maximum contribution room of $63,500. A couple would have $127,000 in cumulative contribution room available. You might not have $127,000 sitting around right now, but making small contributions each month adds up quickly, and people often come across extra cash from a work bonus, the sale of some stuff they no longer use, a small inheritance, or even the proceeds from a lucky day at the race track.

Let’s take a look at two stocks that might be interesting picks to help you set up your passive-income TFSA portfolio.

Inter Pipeline (TSX:IPL)

Inter Pipeline owns natural gas extraction assets, oil sands pipelines, and conventional oil pipelines in the Canadian energy patch. The company also owns a growing liquids storage operation with facilities located in a number of European countries.

The diverse revenue stream helps smooth out any volatility in a particular segment. Last year, the gas processing division benefitted from improved market prices, while the liquids storage business saw a drop in utilization. In Q1 2019, the roles reversed.

Inter Pipeline is making good progress on its $3.5 billion Heartland Petrochemical Complex and has a knack for finding strategic tuck-in acquisitions.

The company has raised the dividend for 10 straight years. The existing payout provides an annualized yield of 8.2%.

Power Financial (TSX:PWF)

Power Financial is a holding company with interests in a number of Canadian wealth management and insurance businesses. It is also a partner in a European holding company that holds stakes in a number of Europe’s top global companies.

The portfolio is performing well, and management is doing a good job of sharing the spoils with investors. Power Financial raised the dividend by 5% this year and recently repurchased $1.65 billion in stock.

The current dividend provides a 6% yield.

The bottom line

An equal investment between the two stocks would provide an average yield of 7.1%. This would generate about $9,000 per year, or just over $750 per month in tax-free income for a couple who each maxed out their $63,500 in contribution room.

Diversification is advised when building an income portfolio, and the TSX Index has many other reliable dividend stocks that offer attractive yields.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Andrew Walker has no position in any stock mentioned.

More on Dividend Stocks

ways to boost income
Dividend Stocks

1 Excellent TSX Dividend Stock, Down 25%, to Buy and Hold for the Long Term

Down 25% from all-time highs, Tourmaline Oil is a TSX dividend stock that offers you a tasty yield of 5%…

Read more »

Start line on the highway
Dividend Stocks

1 Incredibly Cheap Canadian Dividend-Growth Stock to Buy Now and Hold for Decades

CN Rail (TSX:CNR) stock is incredibly cheap, but should investors join insiders by buying the dip?

Read more »

bulb idea thinking
Dividend Stocks

Down 13%, This Magnificent Dividend Stock Is a Screaming Buy

Sometimes, a moderately discounted, safe dividend stock is better than heavily discounted stock, offering an unsustainably high yield.

Read more »

Canadian Dollars bills
Dividend Stocks

Invest $15,000 in This Dividend Stock, Create $5,710.08 in Passive Income

This dividend stock is the perfect option if you're an investor looking for growth, as well as passive income through…

Read more »

A Canada Pension Plan Statement of Contributions with a 100 dollar banknote and dollar coins.
Dividend Stocks

3 Compelling Reasons to Delay Taking CPP Benefits Until Age 70

You don't need to take CPP early if you are receiving large dividend payments from Fortis Inc (TSX:FTS) stock.

Read more »

A worker overlooks an oil refinery plant.
Dividend Stocks

Better Dividend Stock: TC Energy vs. Enbridge

TC Energy and Enbridge have enjoyed big rallies in 2024. Is one stock still cheap?

Read more »

Concept of multiple streams of income
Dividend Stocks

Got $10,000? Buy This Dividend Stock for $4,992.40 in Total Passive Income

Want almost $5,000 in annual passive income? Then you need a company bound for even more growth, with a dividend…

Read more »

Investor reading the newspaper
Dividend Stocks

Emerging Investment Trends to Watch for in 2025

Canadians must watch out for and be guided by emerging investment trends to ensure financial success in 2025.

Read more »