A volatile stock market still provides investors an opportunity to generate a passive-income stream by purchasing shares of companies that pay a dividend. Additionally, if these TSX dividend stocks are held in a TFSA (Tax-Free Savings Account), any returns in the form of dividend payouts and long-term capital gains will be sheltered from Canada Revenue Agency taxes.
The cumulative TFSA contribution room for 2023 will increase to $88,000. So, let’s look at three monthly paying dividend stocks that can help you earn $475 in tax-free income each month in 2023.
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY |
| Keyera | $30.19 | 971 | $0.16 | $155.36 | Monthly |
| Exchange Income Corp. | $48.55 | 604 | $0.21 | $126.84 | Monthly |
| Northwest Healthcare | $9.86 | 2,975 | $0.067 | $199.32 | Monthly |
An energy stock for your TFSA
The first stock on my list is Keyera (TSX: KEY), a midstream energy company. Over the years, Keyera has maintained a strong financial position with a low net debt to adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) ratio of 2.9 times.
Armed with an investment-grade balance sheet and $1.2 billion in available liquidity, Keyera has minimal debt maturities in the next five years.
Its integrated network of cash-generating assets allows the company to derive incremental cash flows across the midstream value chain.
In the last five years, Keyera’s average return on invested capital stood at 14%. Its distributable cash flow and dividends per share have increased by 9% and 7%, respectively, since 2008.
Keyera pays investors a monthly dividend of $0.16 per share, translating to a dividend yield of 6.4%.
An undervalued TSX stock
Exchange Income (TSX: EIF) has returned massive wealth for shareholders since it was listed on the TSX in 2004. In the last 18 years, EIF stock has returned 20% annually, easily outpacing the TSX index.
Despite its outsized returns, Exchange Income pays investors a monthly dividend of $0.21 per share, indicating a forward yield of 5.2%. Since its initial public offering, dividend payouts have increased at an annual rate of 5%.
Exchange Income is among the cheapest stocks on the TSX. Valued at 16 times forward earnings, the company is expected to increase adjusted earnings at an annual rate of 12% annually in the next five years. Given consensus price targets, Exchange Income is trading at a discount of almost 35% right now.
A real estate investment trust
The final dividend stock on my list is Northwest Healthcare (TSX:NWH.UN), a real estate investment trust (REIT). The healthcare-focused REIT pays investors a monthly dividend of $0.067, indicating a tasty forward yield of 8.1%.
Northwest Healthcare is part of a defensive sector and should generate stable cash flow and earnings across business cycles.
With a presence in eight countries, Northwest Healthcare has an ever-expanding portfolio of hospitals, medical office buildings, and clinics. The assets have long-term inflation-indexed leases with stable occupancies.
With $10.6 billion of assets under management, 233 properties, and 2,100 tenants, Northwest Healthcare’s portfolio spans 18.6 million square feet with an average lease expiry of 14 years.
The Foolish takeaway
If you equally distribute the TFSA contribution room in these three TSX stocks, investors can generate $5,720 in annual dividends, indicating a monthly payout of $477. In addition to regular dividend payments, these three stocks can also help shareholders benefit from long-term capital gains.
