A fully stocked TFSA is a powerful financial asset, and unlike an RRSP, its application doesn’t lie years into the future. You can use your TFSA assets whenever you want, and this flexibility, combined with the tax-free nature of whatever growth and income you generate within this account, makes it a perfect resource for starting a passive income.
And you might not even need to use every last dollar in your fully stocked TFSA to start a monthly income as hefty as $350. You will need about $60,000 invested in the right dividend stocks.
A mortgage company
There are only a few big players in the residential mortgage industry in Canada (apart from the big banks), and First National Financial (TSX:FN) is one of them. The company served over 342,000 borrowers in 2020 alone and had about $118 billion worth of mortgages under its administration. These are amazing numbers for a company with a market capitalization of just $2.4 billion.
The company is also an aristocrat and has grown its payouts for nine consecutive years. And endorsing the company’s potential when it comes to dividend sustainability is its payout ratio, which only broke through the 100% mark once since 2012 (in 2015). The current yield is 5.7%, and if you invest $20,000 in this non-bank lender, you can get about $95 a month.
An energy giant and aristocrat
Despite being the largest midstream fossil fuel (oil and gas) operator in the country, the market capitalization of Keyera (TSX:KEY) puts it far below the giants. And that’s not because the company’s current valuation is a mere fraction of what it used to be. The company has suffered from the decline of the energy sector over the years, and it’s reflected in the 42% slump since its peak in 2014, but the decline has been relatively gradual.
The company pays monthly dividends, and even through the tough phase of the pandemic, the company has managed to sustain its payouts. The payout ratio is still dangerously high, but it’s slightly lower than the 2020s, indicating some measure of improvement. The company is offering a juicy 6.8% yield, and if you invest $20,000 of your TFSA capital in this Dividend Aristocrat, you will get an income of about $113 a month.
A generous REIT
REITs usually offer amazing yields, but Inovalis REIT’s (TSX:INO.UN) current yield of 8.9% stands out, even among the generous dividend payer group of REITs. It’s an office REIT with a completely European portfolio, and it managed to sustain its payouts (and even paid a hefty special dividend), despite the rough phase of the pandemic, especially for Inovalis’s underlying asset class. What’s more, the REIT’s payout ratio remained quite stable.
The REIT is currently both discounted and undervalued and is offering its hefty yield at a payout ratio of 82.6%. And if you invest $20,000 in this REIT at this yield, it will give you monthly payouts of about $148.
The three dividend stocks in your TFSA give you about $356 a month with $60,000 invested. That’s a sizeable enough sum to help you meet a number of small expenses. And if you keep piling it up for a whole year, the $4,272 makes up more than two-thirds of a year’s TFSA contribution room.