Passive-Income Power: How to Churn Out Over $420/Month in TAX-FREE Income

Canadian investors can generate passive income that exceeds $420 a month with stocks like Extendicare Inc. (TSX:EXE) in the spring of 2022.

| More on:
Payday ringed on a calendar

Image source: Getty Images

The S&P/TSX Composite Index has encountered major volatility in the month of May. This has made it tricky for investors who may be juggling strategies at this stage. Instead of selling in May and going away, today I want to discuss how we can pursue a passive-income strategy. In this hypothetical, we’re going to snatch up stocks that will allow us to generate over $420 per month in tax-free income going forward. We are going to need to utilize all $81,500 of our cumulative TFSA room in order to achieve this.

Let’s dive in.

This energy stock belongs in your passive-income portfolio

Keyera (TSX:KEY) is a Calgary-based company that is engaged in the energy infrastructure business in Canada. The Canadian energy sector has been on fire in 2022 due to soaring oil and gas prices. Shares of Keyera have increased 16% in 2022 as of close on May 20. Investors on the hunt for passive income should look to this promising energy stock right now.

This dividend stock closed at $33.50 per share on May 20. In our scenario, we will snatch up 810 shares of Keyera for a total purchase price of $27,135. This dividend stock offers a monthly dividend of $0.16 per share. That represents a very strong 5.7% yield. Investors will be able to generate monthly passive income of $129.60 in their TFSA with this investment.

Here’s a future stock that offers big dividends

Extendicare (TSX:EXE) is a Markham-based company that provides care and services for seniors throughout the country. Canada’s aging population should spur investors to seek out stocks like Extendicare. Its shares have dropped 4.1% so far in 2022. The stock is down 11% from the prior year.

Shares of Extendicare closed at $7.11 on May 20. In our hypothetical, we will buy a whopping 3,820 shares of Extendicare for a purchase price of $27,160. This dividend stock last paid out a monthly dividend of $0.04 per share, which represents a tasty 6.7% yield. These holdings will allow us to churn out monthly passive income of $152.80 in our income-oriented TFSA.

One healthcare REIT that boasts nice monthly passive income

Back in April, I’d discussed why income investors should look to Canadian real estate investment trusts (REITs). Passive-income investors can churn out big returns by targeting top REITs in 2022. The last stock I want to snatch up in our hypothetical TFSA is Northwest Healthcare (TSX:NWH.UN). This Toronto-based REIT offers exposure to a portfolio of high-quality healthcare real estate. Its shares have dropped 5.2% so far this year.

Northwest Healthcare REIT closed at $12.96 per share on May 20. We can snatch up 2,095 shares of Northwest for a total of $27,151. It currently offers a monthly distribution of $0.067 per share. That represents a tasty 6.1% yield. This means we can generate passive income of $140.36.

Bottom line

These investments will allow us to churn out total monthly passive income of $422.76 in our TFSA.

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 Ambrose O'Callaghan has no position in any of the stocks mentioned. The Motley Fool recommends KEYERA CORP and NORTHWEST HEALTHCARE PPTYS REIT UNITS.

More on Investing

A close up image of Canadian $20 Dollar bills
Dividend Stocks

Passive Income: How to Make $106 Per Month Tax Free

Holding quality, high-yield dividend stocks such as Freehold Royalties in a TFSA can help you earn tax-free income for life.

Read more »

TFSA (Tax free savings account) acronym on wooden cubes on the background of stacks of coins
Dividend Stocks

How to Earn a TFSA Paycheque Every Month and Pay No Taxes on it

Stocks like First National Financial (TSX:FN) pay you monthly. You can also earn monthly dividends through portfolio diversification.

Read more »

woman analyze data
Investing

Why I’d Buy Nvidia Stock Even at Today’s Prices

Nvidia’s dominant position in the AI space and the ongoing demand for its GPUs suggest that the stock’s upward trajectory…

Read more »

stock analysis
Dividend Stocks

1 Dividend Superstar I’d Buy Over TD Bank Stock

TD (TSX:TD) stock may look undervalued, but there are reasons for the price drop. Meanwhile, this dividend superstar has more…

Read more »

tsx today
Stock Market

TSX Today: What to Watch for in Stocks on Wednesday, July 17

Trading just below the key psychological level of 23,000, the TSX Composite has been posting fresh record highs for four…

Read more »

A steel grain silo storage tank with solar panel in a yellow canola field in bloom in Alberta, Canada.
Dividend Stocks

Down by 26.77%: Now Might Be the Perfect Time to Buy Nutrien Stock

This TSX stock has seen share prices fall by over 26% from its 52-week highs, but it might be the…

Read more »

Woman has an idea
Dividend Stocks

2 No-Brainer Stocks to Buy Now With $7,000

Two relatively cheap cash cows are no-brainer buys for investors with $7,000 to invest.

Read more »

dividends grow over time
Dividend Stocks

Buy This High-Yield Dividend Stock in July 2024

Buy this high-yielding dividend stock to lock in inflated yield into your portfolio to generate solid passive income for years.

Read more »