It looks like the market bottom may be behind us. After the S&P/TSX Composite Index dipped to three-month lows, there has been a slow climb back up. It had many Tax-Free Savings Account (TFSA) investors thinking: what do I do if this happens again?
Luckily, by investing in solid companies that produce dividends, you can keep stability as part of your TFSA portfolio plan. Furthermore, you can generate cash on a quarterly and even monthly basis.
What stocks to choose
As I mentioned, companies that produce dividends are the best to consider. But you also want ones with strong returns. Combined, TFSA investors can create strong passive income streams each and every month. All while remaining tax-free.
On January 1, 2022, Canadians were given an extra $6,000 in contribution room for their TFSAs. That means you now have a total of $81,500 in tax-free contribution room if you were at least 18 in 2009. And any unused room is carried over year after year. So TFSA investors have plenty of room to make the most of their cash.
Create $964 each and every month
While there are plenty of high-yield stocks available for TFSA investors, not all are created equal. Instead, it’s important to look for blue-chip companies. These companies offer long-term growth as well as dividends. That way you can buy and forget the companies, looking forward to decades of strong passive income.
So let’s say you’re a TFSA investor with $81,500 ready to put toward passive income stocks. I would start with these two that can produce $964 per month.
TD Bank
If TFSA investors want growth and income, then Toronto-Dominion Bank (TSX:TD)(NYSE:TD) should be your top choice of the Big Six Banks. It has paid dividends every year since being founded, becoming a Dividend Aristocrat in the process.
Furthermore, TD stock has solid growth opportunities ahead. It has expanded into the U.S., online, into credit card partnerships, and is the leader in loan payment plans. TD stock offers a dividend yield of 3.44%, which recently increased by 13%. That’s a dividend of $3.56 per share per year. Finally, shares have increased 425% in the last 20 years.
BCE
TFSA investors should also seek out the telecommunications industry these days. This is a constantly moving industry, and BCE (TSX:BCE)(NYSE:BCE) is at the forefront. It holds 60% of the market share in telecom, owns radio and television stations, and continues to expand its fibre-to-the-home and 5G network.
BCE stock continues to be a market beater, and will remain so as few competitors edge in on its space. BCE stock offers TFSA investors a dividend yield of 5.27%, which is due for an increase after a dividend jump last January. You can now receive $3.50 per share per year, and shares have increased 83% in the last decade.
Bottom line
By making $964 per month from these stocks, TFSA investors wouldn’t have to invest all of their contribution room. With $31,500 invested in TD stock, at the same rate an investor could be making $1,050 in dividends each year, and make $6,000 in returns. As for BCE stock, investing the same amount could bring in $1,670 in dividends and $2,844 in returns.
That’s a total of $11,564 in returns in just one year, and about $964 in monthly income for TFSA investors. All with just the click of a few buttons.
