Given that you don’t pay any tax when investing through a Tax-Free Savings Account (TFSA), it is a great place to grow and compound passive income. When you keep all your income, you can re-invest it back into more stocks. The more stocks you own, the more dividend income you will earn over time.
The TFSA is a great place to compound passive income
If you give your investments years and even decades to compound in a TFSA, you could have a portfolio that yields enough passive income to supplement your retirement lifestyle. It will take time and some patience, but it will be worth it in the end.
If you are looking for a place to start, here are three TSX stocks that could turn a $45,000 TFSA portfolio into $2,733 in passive income per year.
Enbridge: A nice high yield
Right now, Enbridge (TSX:ENB) stock is yielding 6.4%. If you put $15,000 into this stock right now, you’d be set to earn $240 a quarter, or $960 a year.
Energy security is a major issue across the world. As a leading energy infrastructure company in North America, Enbridge is perfectly positioned to provide long-term energy solutions for society. Enbridge’s cash flows are protected by long-term contracts, and its pipeline networks have attractive scarcity value.
In its third quarter, adjusted earnings per share increased 13.5% to $0.67. The company continues to invest heavily to expand its network, add renewables, and grow its utility and export businesses.
This should support mid-single-digit earnings and dividend growth for the coming years ahead. For passive income and some modest capital growth, this is an ideal stock to hold in your TFSA.
Dream Industrial REIT: Great value and solid passive income
Dream Industrial Real Estate Investment Trust (TSX:DIR.UN) stock earns a 5.88% distribution yield. This is attractive, given it was yielding closer to 4% only a year ago. If you put $15,000 into Dream Industrial stock, you would earn $73.50 in passive income every month, or $882 in total for the year.
Dream owns a large industrial property portfolio across Canada and Europe. It manages a U.S. joint venture and just announced its intent to create a new Canadian joint venture with the assets from acquiring Summit Industrial REIT.
With trends like e-commerce, near-shoring, and just-in-case inventory, demand for industrial properties is high, and vacancy is at an all-time low. Despite economic worries, Dream continues to produce strong growth in cash flow per unit. This real estate stock is incredibly cheap, despite its solid growth prospects in the coming years.
BCE: A solid blue chip
Another very defensive blue-chip stock to buy for passive income is BCE (TSX:BCE). It is down 5% this year, and it trades with a 5.94% dividend yield. $15,000 invested in this stock would earn $222.75 quarterly, or $891 per year.
As Canada’s largest telecommunications provider, BCE has a strong, defensive market position. It has been investing heavily in its 5G and fibre optic networks over the past few years.
Once these investments slow, it is expected to earn a large windfall of excess cash. BCE has a long history of growing its dividend by around 5% and further good-sized increases can be expected.
This stock won’t quickly double your money, but investors should get a nice stable stream of passive income that is not likely to stop anytime soon.
