All the way back in March, I’d explored some TFSA strategies for investors to consider this year. The first I’d covered was an income-focused strategy. Fortunately, the cumulative TFSA contribution has steadily expanded over the past decade. This affords investors more flexibility in crafting their portfolios.
Today, I want to cover a hypothetical in which we can use $20,000 of our contribution room to generate a nice tax-free, monthly income stream. The best thing about this is that we will still have over $40,000 in room to invest in growth-oriented equities. Let’s dive in and look at three stocks that can help us hit a goal of over $100 in tax-free income per month.
I’m still bullish on green energy stocks in late 2019, and TransAlta Renewables (TSX:RNW) is one of my favourites. Shares have climbed 53% in 2019 as of close on November 28. The stock has achieved average annual returns of 10% over the past five years.
TransAlta is trading at a premium right now after putting up what has been a stellar year so far. The stock is trading close to a 52-week high, and it possesses a price-to-earnings ratio of 20 as well as a price-to-book value of 1.7. Still, in this case we are here for TransAlta’s stellar dividend yield.
The stock currently boasts a monthly dividend of $0.07833 per share. This represents a 6.2% yield. In our hypothetical, we can purchase 440 shares of TransAlta stock for $6,608.80. This adds up to a monthly dividend payment of roughly $34.40.
In late October, I’d suggested that investors should grab Cineplex (TSX:CGX) ahead of its Q3 earnings report. Cineplex has been a frustrating hold in 2019, but shares have climbed 10% over the past month as of close on November 28. This has pushed the stock into positive territory for the full year.
The company saw adjusted EBITDA surge 93% year over year in Q3 to $106.1 million. It was driven by a 1.8% increase in theatre attendance, as the summer slate managed to give a boost to the North American cinema industry.
Back to our hypothetical, Cineplex stock last closed at $25.27. We’re going to scoop up 260 shares of Cineplex for a total of $6,570.20. Cineplex stock currently boasts a monthly dividend payout of $0.15 per share. This represents a beefy 7.1% yield. In this case, we’d rake in $39 per month from the Cineplex share purchase I’ve outlined here.
Inter Pipeline (TSX:IPL) is a Calgary-based company that is one of the leading natural gas and NGL extraction businesses in North America. Its stock has climbed 22.5% in 2019 as of close on November 28. Revenue is forecast to grow at a steady rate into the next decade. Inter Pipeline is trading close to a 52-week high, but it still offers a P/E ratio of 15 and a P/B value of 2.2. This puts it in favourable value territory relative to industry peers.
Shares of Inter Pipeline last closed at $22.13. A purchase of 300 shares come out to a total of $6,639. Inter Pipeline stock last paid a monthly dividend of $0.1425 per share. This represents a strong 7.7% yield. In this case, Inter Pipeline will provide our portfolio with a payout of $42.75 per month.
Our total purchases bring us below the $20,000 threshold. The share purchases for these three stocks add up to a monthly dividend payout of $116 per month.
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Fool contributor Ambrose O'Callaghan has no position in any of the stocks mentioned.