TFSA Investors: $75,500 in These 3 Stocks Pays $3,926 a Year!

If you want to get $4,000 tax-free in your TFSA, dividend stocks like Enbridge Inc (TSX:ENB)(NYSE:ENB) are worth exploring.

| More on:
Businessperson's Hand Putting Coin In Piggybank

Image source: Getty Images

Want to get $3,926 per year in tax-free dividends in your TFSA?

Based on the maximum contribution — $75,500 — that takes a 5.2% yield. This is simplifying a little, because you could have more than $75,500 in TFSA holdings because of past gains. But if you were 18 or older in 2009 and contribute your maximum today, you have $75,500 in tax-free cash to play with.

With that amount of money invested at a 5.2% yield, you can get $3,926 in instant tax-free income. The challenge is finding that 5.2% yield. Sure, there are individual stocks that yield well over 5.2%. But modern portfolio theory says you have to diversify. So, you’ll need to do a little better than throwing it all on red. In this article, I’ll explore a portfolio of three stocks that yields 5.2% if equally weighted. With this portfolio held in a maxed out TFSA, you can get to $3,926 in annual dividend income.

Enbridge

Enbridge (TSX:ENB)(NYSE:ENB) is a dividend stock that yields 6.85% at today’s prices. Not only is its yield very high today, but it also has a long track record of raising its dividend. Over the past five years, ENB has raised its dividend by 9.3% annualized. That’s a pretty stellar track record of dividend increases. And it could continue. Enbridge just keeps winning the legal battles it’s embroiled in, and its new pipeline projects are going ahead as planned. Expect more transportation capacity, and therefore more revenue, for Enbridge in the future.

Canadian Imperial Bank of Commerce

Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) is a Canadian bank stock that yields 4.02% at today’s prices. If you invest $75,500 at a 4.02% yield, you get $3,035 in cash back every year. That’s a pretty decent payout as it is. But a portfolio consisting of CM and ENB has a much higher payout than that.

Now, you might be wondering, “why not hold just ENB, then, if it has the higher yield?” The answer is, diversification. The more baskets you spread your portfolio across, the less the risk of breaking all the eggs. CM, as a financial stock, shouldn’t be too correlated with ENB, so its contribution to portfolio diversification should be substantial.

TransAlta Renewables

TransAlta Renewables (TSX:RNW) is a utility stock with a 4.73% yield. If you combine that with Enbridge’s yield (6.85%) and CM’s yield (4.02%), you get to a 5.2% total portfolio yield (if all three stocks are equally weighted).

Why RNW, specifically?

First, as a renewable energy utility, it is well positioned to thrive in an era of increasing climate change regulations.

Second, as a monthly-paying dividend stock, it provides increased frequency of income.

Third and finally, this stock has a lot of potential to rise in the future. Its most recent earnings were very disappointing due to a series of unplanned outages at some of its power plants. That was bad for the company, but it will recover to previous earnings levels, and the stock will probably rally when that happens. This stock is definitely riskier than the other two on the list, but it has a lot of potential to recover along with its business.

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 Button has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Enbridge.

More on Dividend Stocks

edit Woman in skates works on laptop
Dividend Stocks

3 No-Brainer Stocks to Buy Under $30

These three stocks all offer a huge deal for investors looking for dividends, as well as growth that will last.

Read more »

You Should Know This
Dividend Stocks

How to Convert a $300 Monthly Investment Into $338 in Monthly Income

If you want a certain amount in monthly passive income, invest a similar amount today and leave the rest to…

Read more »

Increasing yield
Dividend Stocks

3 Income Stocks With Big Yields to Consider in April 2024

If you haven’t yet made your March investments, here are three income stocks to buy the dip and lock in…

Read more »

Senior Man Sitting On Sofa At Home With Pet Labrador Dog
Dividend Stocks

RRSP Investors: Don’t Miss Out on This Contribution Hack!

This hack has so many benefits for you -- not just when you put it in your RRSP but for…

Read more »

A red umbrella stands higher than a crowd of black umbrellas.
Dividend Stocks

Passive Income: 2 Safe Dividend Stocks to Own for the Next 10 Years

Dividend stocks such as Manulife and Fortis can help you generate a stable and recurring passive-income stream.

Read more »

Young woman sat at laptop by a window
Dividend Stocks

3 Dividend Stocks Everyone Should Own for the Long Haul

For investors looking for top-tier dividend stocks to buy and hold for the long term, here are three of my…

Read more »

Payday ringed on a calendar
Dividend Stocks

3 Dividend Stocks That Pay Me More Than $54.57 Per Month

These three dividend stocks have done me well over the years, so let's look at how much I've gotten in…

Read more »

Golden crown on a red velvet background
Dividend Stocks

Dividend Royalty: 3 Fabulous Stocks to Buy Now for Decades of Passive Income

Rogers Communications stock and Canadian Natural Resources stock could pay you dividends for decades to come.

Read more »