Some Canadians use a portion of their Tax-Free Savings Account (TFSA) as an emergency fund. You can be much better off by saving your TFSA contribution room for higher-return investments. Instead, put the emergency fund in a high-interest non-registered account.
Take advantage of your TFSA for a juicy tax-free income stream. If your account is large enough, your TFSA can pay $1,000 per month immediately.
Here are a few high-income Canadian Dividend Aristocrats you can check out for your TFSA tax-free income stream.
Enbridge stock yields 7.7%
Enbridge (TSX:ENB)(NYSE:ENB) consists of a massive network of liquids and gas pipelines are essential businesses that transport or distribute oil and gas across North America.
The company has a stable balance sheet with an investment-grade S&P credit rating of BBB+. ENB stock is a top TSX dividend stock with a track record of dividend increases for 25 consecutive years.
Its quality cash flow stream is primarily supported by investment-grade clients across +40 sources. Coupled with a payout ratio of 60-70%, its outsized 7.7% dividend yield is secure.
Due to stagnant growth in the last couple of years, the blue-chip dividend stock is trading at an attractive valuation. Upside of about 17% over the next 12 months is possible, although a longer investment period is likely to generate greater returns, especially from receiving a periodic juicy dividend.
BCE stock yields 6.1%
BCE (TSX:BCE)(NYSE:BCE) stock is another favourite idea for income. It’s awarded an investment-grade S&P credit rating of BBB+. Over the next few years, it can benefit from the growth from the rollout of 5G.
As a well-established Big Three telecom in Canada, BCE stock generates ample free cash flow to pay an appetizing dividend. In the trailing 12 months, it paid out about 75% of its free cash flow as dividends.
The stable telecom currently offers a juicy yield of 6.1%. At $54.51 per share at writing, the fairly valued stock is likely to provide upside of 5-10% over the next 12 months, which could lead to total returns of 11-16% over the near term.
Bank of Nova Scotia stock yields 5.2%
Bank of Nova Scotia (TSX:BNS)(NYSE:BNS) stock is on the path of recovery. As the COVID-19 pandemic becomes history, the international bank will benefit from a global economic recovery, especially from the higher growth in emerging markets.
Meanwhile, the stable bank stock provides a safe 5.2% yield. Its dividend is protected by a normalized payout ratio of about 50%. While its earnings rebound with above-average growth, BNS stock’s payout ratio could be more extended than usual.
Longer term, BNS can probably achieve earnings growth of 5-7% a year. This is also a dividend-growth rate investors can expect down the road.
Bank of Nova Scotia stock is awarded a quality S&P credit rating of A+.
The Foolish takeaway
If you have saved and invested regularly in quality dividend stocks and grown your TFSA into a six-figure portfolio, you could very well earn a $1,000-per-month tax-free income stream.
If not, buying and holding dividend-growth stocks like Enbridge, BCE, and BNS will get you much closer to that goal, as they tend to increase their dividends over time.
