TFSA Passive Income: Earn $440 Per Month Tax Free for Life

Top TSX stocks with attractive and growing dividends are now on sale.

| More on:
Payday ringed on a calendar

Image source: Getty Images

Retirees and other Tax-Free Savings Account (TFSA) investors seeking tax-free passive income are wondering which top TSX dividend stocks are now good to buy for their portfolios.

TFSA limit increase in 2023

The TFSA limit will increase by $6,500 in 2023. This will bring the cumulative maximum contribution limit to $88,000. That’s large enough to help pensioners build meaningful portfolios of stocks and Guaranteed Investment Certificates (GICs) that can generate reliable and growing tax-free passive income.

Seniors who receive Old Age Security (OAS) pensions should consider maxing out their TFSA contributions before holding investments in taxable accounts. The reason is that the Canada Revenue Agency (CRA) does not include TFSA earnings when calculating net world income to determine the OAS pension recovery tax, also known as the OAS clawback. The CRA implements a 15% recovery tax on every dollar of net world income above a minimum threshold. The number to watch for the 2022 income year is $81,761.

GIC rates have increased considerably in 2022, making the GIC a reasonable option again for generating income. Dividends stocks, however, still deserve to be on the radar. Top dividend payers raise the distributions annually and their share prices tend to rise over time, supported by the growing distributions.

Enbridge

Enbridge (TSX:ENB) operates the world’s largest oil and natural gas pipeline infrastructure network. The company transports nearly a third of the oil produced in Canada and the United States and 20% of the natural gas used by Americans. In addition, Enbridge owns an oil export facility and recently took a 30% stake in a Canadian liquified natural gas (LNG) development. In addition, Enbridge has a growing renewable energy group, along with natural gas utilities.

Oil and natural gas demand is expected to rise in the coming years, despite the ongoing shift to electric cars and renewable power production. As such, demand for Enbridge’s transportation and storage services should expand.

The board raised the dividend in each of the past 27 years. Enbridge has a $17 billion capital program on the go that will help drive revenue and cash flow growth over the medium term to support ongoing dividend increases.

At the time of writing, the stock provides a 6.4% dividend yield.

BCE

BCE (TSX:BCE) is Canada’s largest communications company with wireline and wireless networks across the country that deliver internet, TV, security, and mobile services to homes and businesses. BCE also owns a media group with assets that include a TV network, specialty channels, radio stations, and interests in sports teams.

The mobile and internet subscription revenues should hold up well even if the economy goes through a recession in 2023 or 2024, as is widely predicted by economists. As a result, BCE should be a good stock to buy if you are concerned about potential economic turbulence.

The board increased the dividend by at least 5% in each of the past 14 years. BCE is on track to meet its 2022 financial guidance, so there should be a decent dividend hike on the way for 2023.

Investors who buy BCE stock at the current share price near $63 can get a 5.8% dividend yield.

The bottom line on top stocks to buy for passive income

Enbridge and BCE are good examples of stocks that pay attractive and growing dividends for a diversified portfolio targeting passive income.

Investors can quite easily build a balanced TFSA today with top dividend stocks that will generate an average yield of 6%. In a self-directed TFSA worth $88,000 this would generate $5,280 per year in tax-free earnings. That’s $440 per month!

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.

The Motley Fool recommends Enbridge. The Motley Fool has a disclosure policy. Fool contributor Andrew Walker owns shares of BCE and Enbridge.

More on Dividend Stocks

Dollar symbol and Canadian flag on keyboard
Dividend Stocks

Get Set for Success in 2023 With 3 Top Canadian Dividend Stocks

Here are three Canadian dividend stocks that could be set to succeed.

Read more »

data analyze research
Dividend Stocks

Passive Income + Value: 2 Dividend Studs to Buy Together

Buy and hold Agnico Eagle Mines (TSX:AEM) and another steady dividend payer right here.

Read more »

Increasing yield
Dividend Stocks

3 Ultra-High-Yield Dividend Stocks to Buy Before November Ends

Given their high dividend yields and attractive valuations, these three stocks are excellent buys for income-seeking investors.

Read more »

money cash dividends
Dividend Stocks

3 Great Dividend Stocks You Can Buy for Less Than $100

These under-$100 stocks can generate solid passive income for investors amid all market conditions.

Read more »

Canadian stocks are rising
Dividend Stocks

1 Dividend-Growth Stock You Won’t Want to Miss in the Real Estate Sector

A growth-oriented REIT is a strong buy today after raising its dividend by more than 5% in each of the…

Read more »

HIGH VOLTAGE ELECRICITY TOWERS
Dividend Stocks

Better Buy: Emera Stock vs. Hydro One

Higher-risk utility Emera should provide higher returns over the next five years, given the dip and its higher yield.

Read more »

Payday ringed on a calendar
Dividend Stocks

Passive-Income Hat Trick: 3 TSX Stocks to Buy for Monthly Cash

Investors seeking passive income can invest in these Canadian dividend stocks and earn attractive monthly passive income.

Read more »

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

Get Passive Income of $435/Month With This TSX Stock

Here’s how dividend investing in Canada could help you get reliable monthly passive income.

Read more »