Retirees have been thrown into a challenging environment in 2020. Earlier this year, I’d discussed how retirees can gobble up huge income on a monthly basis. Today, I want to discuss how some tactical investments in a TFSA can help retirees generate over $500/month in tax-free income. In this hypothetical, we’re going to be using the entirety of the $69,500 cumulative room in a TFSA.
Retirees: Two REITs that can generate huge income
RioCan REIT (TSX: REI.UN) is the first income-generating stock I want to look at today. Its shares have plunged 38% in 2020 as of close on August 20. REITs have been hit hard by uncertainty due to the COVID-19 pandemic. The stock last closed at $15.58.
In our hypothetical, we will purchase 1,347 shares of RioCan REIT for a little under $21,000. RioCan REIT pays out a monthly dividend of $0.12 per share. With this holding in our TFSA, we will be able to generate $161.64 in tax-free monthly income. That works out to $1,939 in annual tax-free income. This is a great starting point for retirees, but we’re not done yet.
True North REIT (TSX: TNT.UN) is another open-ended real estate investment trust. This REIT operates a portfolio of commercial properties in urban cities across Canada. Shares of True North have dropped 13% so far in 2020. However, its shares have increased 14% over the past three months. This is another REIT worth owning for retirees.
The stock last closed at $5.96. In our hypothetical, we’re going to purchase 4,194 shares for a little under $25,000. This is due to True North’s tantalizing value. It last possessed a favourable price-to-earnings ratio of 14 and a price-to-book value of 0.9. True North currently offers a monthly distribution of $0.0495 per share. This holding in a TFSA would net $207.60 per month in tax-free income.
With our two REITs and less than $47,000 in TFSA room, we net nearly $370/month in tax-free income.
One healthcare stock that pays a tasty dividend
In May, I’d discussed why investors should pursue healthcare stocks in 2020 and beyond. Extendicare is a stock suited to retirees because of its income and its position in a promising space. The company provides care and services for seniors in Canada.
Shares of Extendicare have fallen 31% in 2020 as of close on August 20. It last closed at $5.51. Today, we’re going to purchase 2,450 shares of Extendicare for just under $13,500. Extendicare last declared a monthly distribution of $0.04 per share, representing an 8.7% yield. With our holdings, that works out to a monthly tax-free dividend payout of $98.
Retirees should also consider this energy stock
Keyera is the final stock I want to look at for retirees today. This company is engaged in the energy infrastructure business in Canada. Its stock has dropped 23% so far this year. Keyera stock last closed at $24.85.
In this hypothetical, we’re going to spend the rest of our TFSA room and purchase 402 shares of Keyera stock. It currently offers a monthly dividend of $0.16 per share, which represents a strong 7.7% yield. This would net a tax-free payout of $64.32 on a monthly basis.
Retirees can sleep easy knowing that their TFSA would generate over $530/month in dividend income. That works out to over $6,300 on an annual basis.
