TFSA Passive Income: 5 Stocks for Tax-Free Dividends

Use the TFSA to create a portfolio of quality dividend stocks and benefit from a passive-income stream in 2023.

| More on:
Various Canadian dollars in gray pants pocket

Image source: Getty Images

After a tumultuous year, equity investors would like to benefit from a market recovery in 2023. But economic challenges will continue to haunt shareholders in the near term, given rising interest rates, inflation, supply chain issues, and the threat of a recession.

As the stock market is expected to remain volatile in 2023, investing in quality dividend stocks will allow you to create a passive-income stream and limit losses. Moreover, if these stocks are held in a TFSA (Tax-Free Savings Account), the dividend payouts will be exempt from Canada Revenue Agency taxes.

What is the TFSA contribution limit for 2023?

Due to higher commodity prices, the TFSA contribution limit in 2023 has increased to $6,500. So, the cumulative TFSA contribution limit will increase to $88,000 at the start of 2023. It makes sense to leverage TFSA benefits and use the popular account to create a robust portfolio of dividend stocks trading on the TSX. Let’s see how.

Brookfield Renewable Partners

Brookfield Renewable Partners (TSX:BEP.UN) is among the largest clean energy companies globally. It currently offers investors a tasty dividend yield of 4.8% and has returned 1,690% to investors in the last two decades.

Brookfield Renewable continues to expand its base of cash-generating assets, which should drive future cash flows higher, resulting in higher dividend payouts over time.

Down 41% from all-time highs, BEP stock is currently trading at a discount of 50%, given consensus price target estimates.

goeasy

A TSX stock that operates in the financial lending space, goeasy (TSX:GSY) has created staggering wealth for long-term shareholders. In the last 20 years, GSY stock has surged close to 4,000% and still offers investors a forward yield of 3.4%.

COMPANYRECENT PRICENUMBER OF SHARESDIVIDENDTOTAL PAYOUTFREQUENCY
Brookfield Renewable$34.85505$0.43$217Quarterly
Innergex Renewable$16.351,076$0.18$194Quarterly
Enbridge$53.69328$0.8875$291Quarterly
goeasy$105.70167$0.91$152Quarterly
Bank of Nova Scotia$66.38265$1.03$273Quarterly

While goeasy is part of a cyclical industry, it has increased dividend payouts at an annual rate of 18.7% in the last 15 years.

Due to the ongoing market selloff, GSY stock is down 50% from all-time highs. But it allows investors the opportunity to buy the dip, and it’s trading at a discount of over 90% right now.

Enbridge

An integrated energy giant, Enbridge (TSX:ENB) is among the most popular dividend stocks on the TSX. Enbridge’s cash flows are hedged to inflation and tied to long-term contracts, making it immune to fluctuations in commodity prices.

Its vast and expansive pipeline network allows Enbridge to generate earnings across market cycles. Moreover, the company’s strong balance sheet has allowed it to increase dividends by 11.6% annually in the last 20 years, and its current dividend yield stands at 6.6%.

Bank of Nova Scotia

A Canadian big bank, Bank of Nova Scotia (TSX:BNS) stock is down 30% from all-time highs, increasing its forward yield to over 6%. While investors are worried about rising delinquency rates amid higher debt costs and an uncertain environment, BNS is well capitalized and equipped with a strong balance sheet.

Innergex Renewable

The final dividend stock on my list is Innergex Renewable (TSX:INE), which currently yields 4.4%. The shift towards renewable energy sources is inevitable, making Innergex a top bet right now.

Given consensus price target estimates, Innergex Renewable might deliver 25% returns to shareholders in the next year after adjusting for dividends.

The Foolish takeaway

An investment of $88,000 distributed equally between these five TSX stocks will allow shareholders to generate $4,508 in annual dividend payouts. You can use this article as a starting point, add various other dividend stocks to this list, and benefit from regular payouts in 2023.

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.

Fool contributor Aditya Raghunath has positions in Brookfield Renewable Partners and Enbridge. The Motley Fool recommends Bank Of Nova Scotia, Brookfield Renewable Partners, and Enbridge. The Motley Fool has a disclosure policy.

More on Dividend Stocks

grow dividends
Dividend Stocks

2 TSX Stocks With a Dividend Bump Coming

These two top TSX stocks have lengthy dividend growth streaks and are high-quality companies, making them ideal investments for passive…

Read more »

edit Woman calculating figures next to a laptop
Dividend Stocks

2 TSX Stocks I’ll Be Buying Hand Over Fist in February 2023

Top TSX stocks such as Brookfield Asset Management have the potential to deliver outsized gains to shareholders this year.

Read more »

edit Business accounting concept, Business man using calculator with computer laptop, budget and loan paper in office.
Dividend Stocks

How to Generate $500 in Tax-Free Passive Income Per Month

While the stock market is unpredictable, you can make a calculated investment and get a fixed passive income under a…

Read more »

grow money, wealth build
Dividend Stocks

3 TSX Stocks With 25 Years of Consecutive Dividend Growth

TSX stocks like Enbridge (TSX:ENB) should be on your Dividend Aristocrats watchlist.

Read more »

Business people standing near houses models
Dividend Stocks

Why Canadian Apartment Properties REIT Notched a 15% Gain in January 2023

CAPREIT may not look like a deal at the outset, but long-term growth projections would disagree – especially when considering…

Read more »

edit Businessman using calculator next to laptop
Dividend Stocks

1 Oversold Dividend Stock (With a 8% Yield) I’m Buying Right Now

Real estate investment trusts Northwest Healthcare offers investors a tasty dividend yield of almost 8%.

Read more »

A red umbrella stands higher than a crowd of black umbrellas.
Dividend Stocks

2 Recession-Resistant Stocks to Buy for Steady Gains in 2023

Investors worried about a recession can look to buy utility stocks such as Hydro One and Waste Connections right now.

Read more »

Dial moving from 4G to 5G
Dividend Stocks

Down by 15%: Is BCE Stock a Good Investment in January 2023?

Few companies are truly “too big to fail,” but most market leaders are far more resilient against market headwinds or…

Read more »