TFSA Passive Income: Make $455/Month Tax Free for Life

Canadian investors can churn out big passive income in their TFSA with stocks like Freehold Royalties Ltd. (TSX:FRU) and others in 2022.

Ambrose O'Callaghan

Ambrose O'Callaghan graduated with a BA in Political Science from McMaster University. After that, he jumped into the banking world. He worked from the front line to an investment associate role. After that, he found a way to marry his experience and knowledge in the world of banking and finance to his love and passion for writing. Ambrose is a passionate believer in Warren Buffett's value investing model.

Published September 25, 2022 1:30 pm EDT

The annual contribution room in a Tax-Free Savings Account (TFSA) remained at $6,000 in 2022. That brought the cumulative contribution room in your TFSA to $81,500 this year. Today, I want to discuss how you can look to generate over $450 per month in your TFSA for the long haul. We will be using all our cumulative contribution room in this hypothetical.

Investors should keep in mind that this is a hypothetical to demonstrate how you can generate big income in your TFSA given the opportunity. Foolish investors should look to heavily diversify their portfolios instead of throwing in with a handful of stocks. Let’s jump in.

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This energy stock is a perfect target for your TFSA

Keyera (TSX: KEY) is a Calgary-based company that is engaged in the energy infrastructure business. Shares of this energy stock have climbed 5.5% year to date as of close on September 22. The stock is down 5.8% compared to the same time in 2021.

This energy stock closed at $30.27 per share in yesterday’s trading session. In our hypothetical, we can snatch up 625 shares of Keyera for a total purchase price of $18,918.75. The stock offers a monthly dividend of $0.16 per share. That represents a tasty 6.3% yield. This investment means we can deliver monthly passive income of $100 in our TFSA.

Here’s a green energy stock that provides big passive income

TransAlta Renewables (TSX: RNW) is the second stock I’d look to snatch up in our passive-income-focused TFSA today. This Calgary-based company develops, owns, and operates renewable power-generation facilities. Its shares have dropped 14% so far in 2022.

The green energy stock closed at $15.96 per share on September 22. We can scoop up 1,120 shares of TransAlta Renewables for a total price of $17,875.20. This green energy stock boasts a monthly dividend payout of $0.078 per share, which represents a strong 5.8% yield. That means you can churn out $87.36 in tax-free passive income per month.

Another energy stock to stash in your TFSA

Freehold Royalties (TSX: FRU) is a Calgary-based oil and gas royalty company. This company sets out to reward its shareholders with attractive and consistent income. Its shares have climbed 12% in the year-to-date period. The stock is up 37% from the same period in 2021.

Shares of Freehold Royalties closed at $14.50 per share on September 22. In our scenario, we can snag 1,600 shares of this dividend stock for a purchase price of $23,200. Freehold currently offers a monthly dividend of $0.09 per share, representing a monster 7.4% yield. This will allow us to churn out tax-free monthly passive income of $144.

One more dividend stock that can help you churn out passive income for life

Extendicare (TSX: EXE) is the fourth dividend stock that I’d zero in on in this hypothetical. This Markham-based company provides care and services for seniors across Canada. Its shares have dropped 8.2% in 2022 as of close on September 22.

This dividend stock closed at $6.94 per share on September 22. We can snatch up 3,100 shares of Extendicare for a total price of $21,514. The stock offers a monthly distribution of $0.04 per share. That represents a very strong 6.9% yield. This investment will allow us to make monthly passive income of $124 in our TFSA.