How to Generate Over $550 in Passive Income Each Month — TAX FREE!

Canadian investors can churn out huge passive income — TAX FREE! — with stocks like TransAlta Renewables Inc. (TSX:RNW).

| More on:
Various Canadian dollars in gray pants pocket

Image source: Getty Images

Most successful investors will have found a way to generate consistent passive income. The Tax-Free Savings Account (TFSA) is typically lauded for its effectiveness as an instrument for growth. However, it can also by a dynamite source of passive-income generation, as your returns are entirely tax free. Today, I want to discuss how we can generate $550 in passive income in our TFSAs. In this hypothetical, we will utilize the $88,000 of cumulative room available. Let’s jump in.

Here’s an energy stock that can deliver big passive income

Keyera (TSX:KEY) is the first dividend stock I’d look to snatch up in our TFSA today. This Calgary-based company is engaged in the energy infrastructure business. Its shares have climbed 3.1% in the year-over-year period as of close on January 10. Keyera is a great passive-income target right now.

This stock closed at $29.70 per share on January 10, 2023. In our hypothetical, we can snatch up 750 shares for a purchase price of $22,275. Keyera offers a monthly distribution of $0.16 per share. That represents a 6.4% yield. This means we will be able to generate tax-free passive income of $120 with this initial investment.

Don’t sleep in this high-yield green energy stock

TransAlta Renewables (TSX:RNW) is another Calgary-based company that develops, owns, and operates renewable power-generation facilities. Shares of this renewable energy stock have dropped 26% in the year-over-year period. However, the stock is up 5.1% to kick off the new year. This is another great target for passive-income investors.

The green energy stock closed at $11.96 on January 10, 2023. For our hypothetical, we will look to purchase 1,850 shares of TransAlta Renewable for a grand total of $22,126. This green energy stock currently offers a monthly distribution of $0.078 per share, which represents a 7.8% yield. The investment means we can churn out passive income of $144.30 in our TFSA with TransAlta.

One more energy stock that can generate nice passive income

Freehold Royalties (TSX:FRU) is a Calgary-based oil and gas royalty company that owns working interests in oil, natural gas, natural gas liquids, and potash properties in Western Canada and the United States. This energy stock has surged 18% in the year-over-year period. Its shares have dipped 1.4% so far this month.

Shares of Freehold Royalties closed at $14.86 on January 10, 2023. We can snatch up 1,450 shares of this energy stock for a purchase price of $21,547. Freehold Royalties offers a monthly distribution of $0.09 per share, representing a 7.2% yield. This means we can churn out passive income of $130.50 in our TFSA through this energy stock.

You can trust this REIT to deliver big income in a TFSA

Slate Office REIT (TSX:SOT.UN) is the fourth and final dividend stock I’d look to snatch up in our hypothetical TFSA. This Calgary-based real estate investment trust (REIT) is an owner and operator of North American office real estate. Its shares have dropped 11% in the year-over-year period.

This REIT closed at $4.43 per share on January 10, 2023. For this final purchase, we can snag 4,950 shares of Slate Office REIT for a grand total of $21,928. The REIT offers a monthly dividend of $0.033 per share. That represents a monster 9% yield. This means we can generate passive income of $163.35 in our hypothetical TFSA.

Bottom line


These investments will allow us to churn out tax-free passive income of $558.15 a month going forward. That will make for a fruitful 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 Ambrose O'Callaghan has no position in any of the stocks mentioned. The Motley Fool recommends Freehold Royalties and Keyera. The Motley Fool has a disclosure policy.

More on Investing

edit Jars of marijuana
Cannabis Stocks

Is Tilray Stock a Buy in the New Bullish Market?

Canadian cannabis producer Tilray has underperformed the broader markets in the last five years due to its weak fundamentals.

Read more »

Woman has an idea

3 No-Brainer Stocks to Buy With $200 Right Now

These three stocks are no-brainer buys, given their solid underlying businesses and healthy growth prospects.

Read more »


2 Stocks I’m Loading Up on in 2024

Alimentation Couche-Tard (TSX:ATD) and another stock that are getting too cheap after their latest corrections.

Read more »

grow money, wealth build
Dividend Stocks

1 Top Dividend Stock That Can Handle Any Kind of Market (Even Corrections)

While most dividend aristocrats can maintain their payouts during weak markets, very few can maintain a healthy valuation or bounce…

Read more »

Red siren flashing
Dividend Stocks

Income Alert: These Stocks Just Raised Their Dividends

Three established dividend-payers from different sectors are compelling investment opportunities for income-focused investors.

Read more »

online shopping
Tech Stocks

1 Hidden Catalyst That Could Ignite Shopify Stock

Here's why Shopify (TSX:SHOP) ought to remain a top growth stock investors continue to focus on for the long haul.

Read more »

Oil pumps against sunset
Energy Stocks

Is it Too Late to Buy Enbridge Stock?

Besides its juicy and sustainable dividends, Enbridge’s improving long-term growth prospects make it a reliable stock to hold for the…

Read more »

Man considering whether to sell or buy
Tech Stocks

WELL Stock: Buy, Sell, or Hold?

WELL stock has a lot of upside as the company is likely to continue to grow, posting positive earnings in…

Read more »