TFSA Investors: How to Earn $250/Month in Passive Income

Utilize your TFSA to earn tax-free passive income on a regular basis! Check out this simple portfolio that earns $250/month!

| More on:

Image source: Getty Images

The Tax-Free Savings Account (TFSA) is an exceptional place to earn and grow passive investment income. You can invest in everything from bonds to exchange traded funds to individual stocks in your TFSA.

The best part is any dividend, interest, or capital gain earned is completely tax-free. That means you keep all that you earn. If you don’t immediately need the cash, you can re-invest into more passive income-producing assets.

In fact, with as little as $60,000 invested in your TFSA, you could earn nearly $250 averaged monthly. As you collect your income, the more you can invest, and accordingly earn more income. Even better, if your stocks consistently increase their dividends.

While a diversified portfolio is recommended to limit concentration risk, here is a simple three-stock portfolio that demonstrates the amount of passive income you can potentially earn in a TFSA.

A top renewables stock for your TFSA

The first stock that is an ideal fit for a TFSA is Brookfield Renewable Partners (TSX:BEP.UN). BEP.UN is a premium renewable power stock across the world. It has operations across the renewable power spectrum, including nuclear power services (after it completes a major acquisition in the space).

Brookfield operates over 21 gigawatts (GW) of power, but it has plans to build out more than five times that over the coming years. Given the trends towards ESG, energy security, and electrification, it has a very long runway of growth ahead.

After a recent decline, Brookfield earns a 4.5% dividend yield. So, $20,000 would buy 510 units of BEP stock. That would earn $221.85 every quarter, or $73.95 averaged monthly. The company has a great track record growing its dividend by the mid-single digits, so there is passive income upside as well.

A top telecom stock

Another passive income stock that would make a great fit for a TFSA is TELUS Corp. (TSX:T). This stock plays both defence and offence in a portfolio. Its major business is providing cellular, internet, and cable services to Canadians. These services are generally contracted and are essential for most Canadians.

The big thing that differentiates TELUS is its vertical investments in technology, healthcare, and agriculture. These are faster-growing segments and could eventually (given time) contribute a lot of value to the stock.

In the meantime, TFSA investors can collect a 5% dividend that is expected to grow by about 7% annually for the next several years. A $20,000 investment would buy 704 shares and earn $246.40 quarterly. That would average $82.13 every quarter.

A royalty stock for a TFSA

Topaz Energy (TSX:TPZ) is an interesting bet for dividend growth in a TFSA. It was spun out of highly regarded natural gas producer Tourmaline Oil just a few years ago. It owns royalty and energy infrastructure assets across Western Canada.

Its assets are in some of the highest production growth regions in Canada, and it has very high-grade counterparties (like Tourmaline). As a result, its royalty stream is expected to enjoy some solid growth in the coming years.

Since its IPO in 2019, it has raised its dividend five times and increased its payout by 50%. Given the strength in energy, more increases are likely. Today, this stock yields 5.8%. A $20,000 investment could buy 925 shares that would earn $277.50 per quarter or $92.50 averaged monthly.

Brookfield Renewable Partners39.15510$0.435$221.85Quarterly
TELUS Corp.28.38704$0.35$246.40Quarterly
Topaz Energy21.60925$0.30$277.50Quarterly
Prices from January 19, 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 Robin Brown has positions in Brookfield Renewable Partners, TELUS, and Tourmaline Oil. The Motley Fool recommends Brookfield Renewable Partners, TELUS, and Topaz Energy. The Motley Fool has a disclosure policy.

More on Dividend Stocks

Dividend Stocks

10 Years From Now, You’ll Be Glad You Bought These Magnificent TSX Dividend Stocks

The TSX is lucrative to buy these magnificent dividend stocks in bulk and be proud of this decision 10 years…

Read more »

calculate and analyze stock
Dividend Stocks

4 Fabulous Dividend Stocks to Buy in July

Are you looking for long-term income? These four dividend stocks should not only provide you with value in July but…

Read more »

financial freedom sign
Dividend Stocks

5 Steps to Financial Freedom for Canadian Millennials

Follow these steps and nothing can stop Canadian millennials from achieving their early retirement dreams.

Read more »

Investor wonders if it's safe to buy stocks now
Dividend Stocks

We’re Only Getting Older: A Top TSX Stock That Benefits From an Aging Population

For a bet on the aging population, consider this small-cap stock with growth potential.

Read more »

Growing plant shoots on coins
Dividend Stocks

Yield Today, Growth Tomorrow: 3 Stocks to Keep Building Your Wealth

For investors seeking yield today and growth tomorrow, these top Canadian dividend stocks are certainly worth considering right now.

Read more »

Payday ringed on a calendar
Dividend Stocks

This 10.72% Dividend Stock Pays Cash Every Month

This dividend stock remains a consistent, defensive dividend producer that will give up over 10% in income each and every…

Read more »

Blocks conceptualizing Canada's Tax Free Savings Account
Dividend Stocks

TFSA Investors: 2 Standout Domestic Stocks With 7% Yields

These top dividend-growth stocks look oversold.

Read more »

Dividend Stocks

2 Dividend Stocks to Double Up on Right Now

Despite their recent declines, the long-term growth outlook of these two top dividend stocks remains strong, which could help their…

Read more »