A Simple TFSA Portfolio to Get $300 in Monthly Tax-Free Income

Here’s how retirees and other income investors can use the TFSA to generate reliable and tax-free passive income.

| More on:
IMAGE OF A NOTEBOOK WITH TFSA WRITTEN ON IT

Image source: Getty Images

TFSA investors are searching for top dividend stocks that will build a reliable passive-income stream to complement pensions or employment earnings.

TFSA advantage

The government created the TFSA in 2009 to give Canadians an extra savings tool on top of the RRSP. Since inception, the cumulative TFSA contribution limit has grown to $75,500 in 2021. That’s large enough to set up a passive-income portfolio that can generate steady tax-free cash flow on hard-earned savings.

The TFSA provides a lot of flexibility. Investors can pull funds at any time to cover emergencies and the full value of all cash removed gets added back to the available contribution room in the next calendar year. Earnings on investments are not taxed, and retirees don’t have to worry about interest or dividends being added to their net world income calculation that determines OAS clawbacks.

The best stocks to own tend to pay attractive and safe dividends that should continue to grow at a steady pace. Let’s take a look at Telus (TSX:T)(NYSE:TU), TD Bank (TSX:TD)(NYSE:TD), and Enbridge (TSX:ENB)(NYSE:ENB) to see why they might be interesting picks today to start a TFSA income fund.

Telus

Telus is a leading player in the Canadian communications industry with wireless and wireline networks that provide customers with mobile, internet, and TV services. The company is expanding its fibre optic and 5G networks to ensure it continues to meet the demands of its subscribers.

New revenue opportunities exist in home monitoring and security services. Telus also has a growing health division that provides digital solutions to help doctors, hospitals, and insurance companies operate more efficiently. The group’s products really showed their value over the past year, and there is strong potential for revenue growth at Telus Health.

Telus has a great track record of raising the dividend. At the time of writing, the stock provides a 4.5% yield.

TD

TD is Canada’s second-largest bank by market capitalization. The company is best known for its Canadian retail operations, but TD also has a large presence in the United States. The American business should benefit from the post-pandemic economic rebound, as massive stimulus efforts turbocharge the recovery.

TD is sitting on significant excess cash right now. The funds were set aside last year to cover a potential wave of defaults. Government assistance for homeowners and businesses helped avoid the worst-case scenario, and investors should reap the rewards when the banks are allowed to resume dividend hikes and share buybacks.

Investors who buy TD stock now can pick up a 3.7% dividend yield.

Enbridge

Enbridge is a key player in the North American energy infrastructure sector. The company transports 25% of all the oil produced in the U.S. and Canada and moves 20% of the natural gas used in the United States. Enbridge also has a growing renewable energy division with wind, solar, and geothermal assets.

Most of the company’s revenue comes from regulated businesses and Enbridge has a large capital program on the go that will continue to support distributable cash flow growth of 5-7% per year. Enbridge’s stock price looks undervalued at the current level and offers a solid 6.8% dividend yield.

The bottom line on TFSA income stocks

Telus, TD, and Enbridge are all top-quality companies with attractive dividends that should continue to grow. An equal investment across the three stocks would provide an average yield of 5% per year. This would generate annual tax-free income of $3,775 on a $75,500 TFSA portfolio.

That’s more than $300 per month!

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.

The Motley Fool owns shares of and recommends Enbridge. The Motley Fool recommends TELUS CORPORATION. Fool contributor Andrew Walker owns shares of Telus, TD Bank, and Enbridge.

More on Dividend Stocks

Woman has an idea
Dividend Stocks

3 No-Brainer Best Dividend Stocks in Canada to Buy With $500 Right Now

Are you craving more cash flow? $500 in one of these best dividend stocks in Canada might deliver a slice…

Read more »

Canadian energy stocks are rising with oil prices
Dividend Stocks

5 Stocks Whose Dividends Just Keep Growing

Stocks like Enbridge and Fortis are growing their dividends for decades, and returning higher cash to their shareholders.

Read more »

Dividend Stocks

2 Stocks I’m Loading Up On in 2024

Restaurant Brands International (TSX:QSR) and another stock I'm pretty close to buying right here, right now.

Read more »

protect, safe, trust
Dividend Stocks

RRSP Investors: 2 Superior Dividend Stocks for Optimal Returns

Superior dividend stocks like the Canadian National Railway (TSX:CNR) can add income power to your portfolio.

Read more »

Increasing yield
Dividend Stocks

TFSA Passive Income: 2 High-Yield Stocks to Buy Before They Bounce

These top TSX dividend-growth stocks look cheap today and offer high yields.

Read more »

Portrait of woman having fun in the street.
Dividend Stocks

Why I Can’t Stop Buying Shares of This Magnificent High-Yield Dividend Stock in My TFSA

This dividend stock continues to be a top winner, even with returns falling the last few years. We're nearing some…

Read more »

Businessman holding tablet and showing a growing virtual hologram of statistics, graph and chart with arrow up on dark background. Stock market. Business growth, planning and strategy concept
Dividend Stocks

TFSA Investors: 1 Cheap Dividend Stock That Could Soar in 2025

This dividend-growth stock now trades at a discounted price and offers a 7% yield.

Read more »

Hand writing Time for Action concept with red marker on transparent wipe board.
Dividend Stocks

1 Dividend Stock Down 13% to Buy Right Now

Are you looking for a buy-the-dip opportunity? This dividend stock is down 13% and is a buy right now before…

Read more »