The Tax-Free Savings Account (TFSA) is a wonderful place to earn, collect, and grow passive income. Since any capital held in the TFSA is free from tax consequence, you can really accumulate a strong and predictable stream of passive income.
You can’t hold income-yielding alternative assets like real estate, a business, or a franchise in your TFSA. These tend to be very time intensive investments that require a lot of experience and expertise.
Fortunately, you can buy stocks that earn elevated passive income inside your TFSA.
Buy low-risk stocks for steady TFSA passive income
The best part is investing in stocks requires very little work and attention (other than your initial investment due diligence/research and quarterly results follow up). If you want a simple and easy way to invest in your TFSA, here’s a straightforward portfolio that could earn $260 every month.
Foolish investors should wisely hold a more diversified portfolio (at least eight to 10 stocks), but this model simply demonstrates the type of income you can collect with $60,000 invested in today’s market.
Choice Property REIT: A safe REIT for passive income
If you want exposure to real estate in your TFSA, real estate investment trusts (REITs) like Choice Property REIT (TSX:CHP.UN) are good investments. Choice is a diversified REIT with a large retail portfolio complemented by some industrial and office properties. With a market cap of $10 billion, it is the largest listed REIT in Canada.
Choice has a very defensive portfolio that is anchored by Superstore and Loblaw-affiliated essential grocery stores. The fact that it is up 1.6% over the past year is a testament to the recession-resilient quality of its portfolio.
While Choice is not growing much, it churns out a nice 4.95% dividend that is sufficiently covered by its cash flows. $20,000 invested in this stock would earn around $82.45 of tax-free income every month in your TFSA.
A&W Revenue Royalty Income Fund
Another economically resilient stock for passive income is A&W Revenue Royalty Income Fund (TSX:AW.UN). A&W fast-food restaurants are a staple in Canada. A&W has found a nice niche by delivering quality ingredients at a reasonable price.
A&W Royalty collects 3% of the revenue from the over 1,000 A&W restaurants located in Canada. It generally distributes most of its earnings right back to shareholders.
While it has a variable dividend structure, this TFSA stock is currently yielding 5.4%. A $20,000 investment in A&W Royalty would earn $87.50 of monthly passive income. This is not a growth stock, but it has a strong franchise, and it pays a consistent, growing dividend.
Pembina Pipeline: A solid TFSA stock for income
If you want exposure to energy, but with less commodity risk, you might want to consider owning Pembina Pipeline (TSX:PPL) in your TFSA. Pembina offers a wide array of energy infrastructure and services in Western Canada. Its biggest source of revenues come from contracted pipeline and natural gas processing assets.
Pembina had a banner year in 2022. As a result, the company has a very solid balance sheet and excess growth capacity in it its network. It should continue to deliver solid results in 2023.
Today, Pembina stock yields a 5.7% dividend. It used to pay a monthly dividend, but it just moved to a quarterly dividend payment. If you invested $20,000 in Pembina stock, your TFSA would earn $283.84 per quarter tax free (or $94.61 averaged monthly).
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY |
| Choice Properties REIT | 14.95 | 1,337 | $0.062 | $82.45 | Monthly |
| A&W Revenue Royalty Income Fund | 36.50 | 547 | $0.16 | $87.50 | Monthly |
| Pembina Pipeline | $45.90 | 435 | $0.6525 | $283.84 | Quarterly |
