Got $6,500? Earn $30/Month Tax-Free Passive Income in 2023 and Beyond

Sure, you could make $30 per month now. But if you reinvest it into your TFSA, you can create tax-free returns that could make you rich!

| More on:
A close up image of Canadian $20 Dollar bills

Image source: Getty Images

There are a few things investors are likely focusing on when looking at this title, such as passive income or the amount you can make each month, for example. But I want you to focus on one word: beyond.

Passive income is great, especially when you can create $30 per month! However, what’s better for investors seeking tax-free income for life is income that lasts. Today, I’m going to look at not just how to create $30 per month with the right passive-income stock in your Tax-Free Savings Account (TFSA). I’m also going to show you how and why you can continue to create returns year after year.

First, choose the right investment

There are so many options out there for investors to choose from. Whether it’s exchange-traded funds, mutual funds, stocks or bonds anything can be the right investment at one time or another. But today, I’m going to focus on a passive-income stock I believe has what it takes to stand the test of time.

That stock is Northland Power (TSX:NPI). Not only has Northland stock already been around for decades, but it’s in the clean energy sector. This sector is growing at a rapid rate, and Northland stock could prove to be one of the biggest beneficiaries.

This is because the passive-income stock focuses on offshore wind farms. While land wind farms need large amounts of vacant land, offshore just needs the vast ocean! What’s more, ocean wind speeds are far higher than they are on land, creating more power than on land ever could. Because of this, offshore wind farms could end up being one of the most used power sources in the future.

Creating $30 per month

Now, if you’re looking to create $30 per month in passive income from this stock, I’ll break it down for you. Northland stock currently trades at $38.13 at the time of writing. It remains in value territory, trading at 13.72 times earnings. You can therefore lock in a dividend yield at 3.18% right now.

As for its share price over time, Northland stock has been around for decades to see how strong its growth has been. In the last 20 years, shares have climbed 1,190%. That’s a compound annual growth rate (CAGR) of 13.63%. Furthermore, its dividend has grown by a CAGR of 1.06% in the last decade alone.

So, here’s how much you would need to invest in order to bring in $30 per month.

COMPANYRECENT PRICENUMBER OF SHARESDIVIDENDTOTAL PAYOUTFREQUENCYTOTAL INVESTMENT
NPI$38.13300$1.20$360Annually$11,439

Don’t spend it yet!

Instead of spending that newly found $360 a year, or $30 per month, reinvest it back into Northland stock! This company has a long history of growth that, as I’ve mentioned, is only going to get stronger in the years to come.

In fact, you could get rich by holding this stock long enough! Let’s say you plan on holding Northland stock for at least the next decade. In that time, we see the same amount of growth we’ve seen in years past. Here’s how that would work out:

YearShares OwnedAnnual Dividend Per ShareAnnual DividendCompound FrequencyAfter DRIP ValueYear End Shares OwnedYear End Stock PriceNew Balance
1300.00C$1.21C$363.28MonthlyC$11,828.61308.49C$43.40C$13,389.46
2308.49C$1.22C$377.53MonthlyC$13,771.90316.25C$49.31C$15,595.55
3316.25C$1.24C$391.12MonthlyC$15,991.19323.31C$56.03C$18,115.31
4323.31C$1.25C$404.09MonthlyC$18,523.55329.72C$63.66C$20,990.86
5329.72C$1.26C$416.47MonthlyC$21,411.14335.53C$72.33C$24,270.09
6335.53C$1.28C$428.31MonthlyC$24,701.88340.79C$82.18C$28,007.47
7340.79C$1.29C$439.62MonthlyC$28,450.27345.53C$93.38C$32,264.88
8345.53C$1.30C$450.46MonthlyC$32,718.24349.80C$106.10C$37,112.72
9349.80C$1.32C$460.87MonthlyC$37,576.22353.65C$120.55C$42,630.97
10353.65C$1.33C$470.87MonthlyC$43,104.24357.10C$136.97C$48,910.58

As you can see, that initial $11,439 investment has increased significantly to almost $50,000! And that’s just from reinvesting your monthly passive income. This investment is certainly worth considering for 2023 and beyond.

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 Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

More on Dividend Stocks

grow dividends
Dividend Stocks

3 Canadian Stocks With a Real Chance of Doubling Your TFSA’s Value

Three outperforming Canadian stocks can help TFSA investors double their account balances.

Read more »

Hand writing Time for Action concept with red marker on transparent wipe board.
Dividend Stocks

3 No-Brainer Stocks I’d Buy Right Now Without Hesitation

At any given time, the market may have certain stocks that offer a powerful combination of reliability, potential, valuation, etc.,…

Read more »

money cash dividends
Dividend Stocks

This 8.39% Dividend Stock Can Pay $100 Cash Every Month

Consider investing in this monthly dividend stock at current levels to lock in high-yielding monthly distributions to create a good…

Read more »

TFSA (Tax free savings account) acronym on wooden cubes on the background of stacks of coins
Dividend Stocks

Here’s the Average TFSA Balance in 2024

The Bank of Montreal (TSX:BMO) says that the average TFSA balance is $41,510, far below the maximum.

Read more »

A glass jar resting on its side with Canadian banknotes and change inside.
Dividend Stocks

Investors: Here’s How to Make $1,000 Each Month in Retirement

Here's how you can easily make $1,000 in monthly passive income in retirement in Canada, without taking on too much…

Read more »

man touches brain to show a good idea
Dividend Stocks

3 No-Brainer TSX Stocks I’d Buy Right Now Without Hesitation

Three TSX stocks that continue to overcome massive headwinds and beat the market are no-brainer buys right now.

Read more »

calculate and analyze stock
Dividend Stocks

TFSA Investors: 2 Top TSX Dividend Stocks to Buy on a Dip and Hold Forever

These top TSX dividend stocks now offer attractive yields and big potential capital gains.

Read more »

grow money, wealth build
Dividend Stocks

1 Dividend Stock to Buy for Growth and Stay for a 5.5% Yield

This dividend stock has been rising higher, but more could certainly be on the way. Now is the time to…

Read more »