TFSA Passive Income: Make $430 Every Month on Repeat

Investors can generate big passive income in their TFSAs with dividend stocks like First National Financial (TSX:FN) for the long haul.

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 October 25, 2022 10:00 am EDT

The annual contribution to a Tax-Free Savings Account (TFSA) remained at $6,000 in 2022. That brought the cumulative contribution room to a hefty $81,500. It remains to be seen whether the annual contribution will remain the same in 2023. Today, I want to explore how TFSA investors can look to generate big passive income by targeting high-yield, monthly dividend stocks.

It is important to note that this article is just an example of how a combination of stocks with high yields can net strong income. Investors should look to diversify your portfolio far beyond just three equities in a real-world situation.

In this hypothetical, we are going to be using all our TFSA contribution room. Let’s jump in.

Here’s an undervalued energy stock that can provide big passive income in your TFSA

Pembina Pipeline (TSX: PPL) is the first dividend stock I’d look to target in our TFSA today. This Calgary-based company provides transportation and midstream services for the energy industry. Shares of this energy stock have climbed 12% in 2022 as of close on October 24.

The company released its second-quarter fiscal 2022 results on August 4. It delivered total revenues of $3.09 billion compared to $1.90 billion in the second quarter of fiscal 2021. Meanwhile, gross profit came in at $711 million — up from $550 million in the previous year.

Pembina closed at $43.56 on October 24. In our hypothetical, we can snatch up 620 shares of this dividend stock for a purchase price of $27,007. This stock offers a monthly dividend of $0.217 per share. That represents a strong 5.9% yield. These shares will allow us to generate monthly passive income of $134.54 in our TFSA going forward.

This cheap REIT is a great TFSA target right now

Dream Industrial REIT (TSX: DIR.UN) is a Toronto-based real estate investment trust (REIT) that owns, manages, and operates a portfolio of industrial assets in Canada and Europe. Its shares have plunged 36% in the year-to-date period. As the chart below demonstrates, that has made up the bulk of its year-over-year losses.

In the second quarter (Q2) of 2022, Dream Industrial delivered net income growth of 7% to $171 million on the back of fair-value adjustments to its investment properties. Total assets rose 15% from the previous year to $7.0 billion.

This REIT closed at $10.80 on Monday, October 24. In our hypothetical, we can look to purchase 2,520 shares of Dream Industrial REIT for a total price of $27,216. The REIT currently offers a monthly distribution of $0.058 per share, which represents a tasty 6.4% yield. That means we can make tax-free, monthly passive income of $146.16 with this stock purchase.

One more dividend stock that can provide passive income going forward

First National Financial (TSX: FN) is the third and final dividend stock I’d look to snatch up to round out our passive-income-oriented TFSA. Shares of First National have dropped 16% in the year-to-date period. The stock is down 22% year over year.

This stock closed at $35.51 per share on Monday, October 24. In this scenario, we can snatch up 765 shares of First National for a purchase price of $27,165. First National also offers a monthly dividend of $0.196 per share, representing a 6.6% yield. This investment allows us to generate passive income of $149.94/month in our TFSA.