TFSA: Invest $20,000 and Get $867/Year Without Lifting a Finger

Compound passive income by investing tax-free in your TFSA. Check out this mini-portfolio that could turn $20K into $867/year in income!

| More on:
calculate and analyze stock

Image source: Getty Images

The TFSA (Tax-Free Savings Account) is the ideal place to compound dividend income. The dividends you earn inside your TFSA are not taxed. When you keep all your income, you can re-invest more of it back into more stocks that generate dividends.

It creates a compounding stream of passive income that grows itself (with almost no work). That is especially so if the stocks you own consistently increase their dividends. Here’s one hypothetical portfolio that could turn $20,000 into $867 per year, without hardly lifting a finger.

TELUS: A top TFSA income stock

TELUS Corp. (TSX:T) has grown its dividend annually by a compounded rate of 8.6% over the past 15 years! TELUS is Canada’s second-largest telecommunications stock. For several years, it has been enjoying market-leading customer growth. Recent investments in fibre optic and 5G networks should only solidify its placement as a top competitor.

As it completes an outsized capital spending program in 2023, the telecom should start to yield a lot of excess cash. The company noted that it plans to increase its dividend by 7–10% annually for the coming few years.

Today, this TFSA stock earns a 4.9% dividend yield. A $5,000 investment in TELUS stock would earn $61.44 every quarter, or $245 annually.

Brookfield Infrastructure

Brookfield Infrastructure Partners (TSX:BIP.UN) has increased its dividend by a 10% compounded annual rate since its IPO (initial public offering) in 2009. The asset manager operates a widely diversified portfolio of essential infrastructure assets (transport, utility, energy, and data).

Over 90% of these assets are contracted or regulated, so its income is quite predictable. Likewise, 75% of earnings are indexed to inflation, so that offers a great hedge to protect its buying power.

This TFSA stock yields 4.08% today. Put $5,000 into this stock and you would earn a $50.70 quarterly dividend, or $202.80 annualized.

Canadian Natural Resources

Canadian Natural Resources (TSX:CNQ) has grown its annual dividend at a rate of 22% over the past 22 years! Even though it operates in the cyclical energy business, it has found a way to consistently grow its business and dividend.

The fact is, CNQ has decades-long reserves that require very little capital to keep producing energy. The company is incredibly efficient and cash flow positive even if oil prices were to drop below US$30 per barrel. Simply put, CNQ is a best-in-class operator, and it has made for a pretty solid long-term investment.

Today, CNQ stock yields 4.2%. A $5,000 investment in CNQ would earn $51.85 per quarter, or $207.40 tax-free annual income inside your TFSA.

TD Bank: A top dividend grower for any TFSA

Like the above TFSA stocks, Toronto-Dominion Bank (TSX:TD) has an excellent history growing its dividend. Since 1995, it has increased its dividend by an 11% annualized growth rate. Its current dividend is 15 times the size it was in 1995!

TD Bank is a top retail and commercial bank across Canada and the Eastern United States. TD has a strong balance sheet and is known for its prudent capital management. With interest rates rising, the bank is set to earn a nice windfall from higher net interest margins.

TD stock yields 4.3% right now. Put $5,000 to work in TD stock and you could earn $52.80 quarterly, or $211.2 annually.

TELUS Corp.28.52175$0.3511$61.44Quarterly
Brookfield Infrastructure Partners47.77104$0.4875$50.70Quarterly
Canadian Natural Resources81.4961$0.85$51.85Quarterly
Toronto-Dominion Bank90.8855$0.96$52.80Quarterly
Prices as of January 27, 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 Infrastructure Partners and TELUS. The Motley Fool recommends Brookfield Infrastructure Partners, Canadian Natural Resources, and TELUS. The Motley Fool has a disclosure policy.

More on Dividend Stocks

Hand arranging wood block stacking as step stair with arrow up.
Dividend Stocks

1 Growth Stock With Legit Potential to Outperform the Market

Identifying the stocks that have outperformed the market (in the past) is relatively easy, but selecting the ones that will…

Read more »

money cash dividends
Dividend Stocks

Passive Income: The Investment Needed to Yield $1,000 Per Annum

Do you want to generate a juicy passive-income stream? Here's a trio of stocks that can generate a yield of…

Read more »

Shopping card with boxes labelled REITs, ETFs, Bonds, Stocks
Dividend Stocks

Invest $10,000 in This Dividend Stock for $1,500.50 in Passive Income

If you have $10,000 to invest, then you likely want a core asset you can set and forget. Which is…

Read more »

Dividend Stocks

Here’s the Average TFSA Balance in 2024

The average TFSA balance has steadily risen over the last six years and surpassed $41,510 in 2023. Will the TFSA…

Read more »

potted green plant grows up in arrow shape
Dividend Stocks

TFSA Set and Forget: 2 Dividend-Growth Superstars for the Long Run

I'd look to buy and forget CN Rail (TSX:CNR) and another Canadian dividend-growth sensation for decades at a time.

Read more »

Caution, careful
Dividend Stocks

Here’s Why I Wouldn’t Touch This TSX Stock With a 50-Foot Pole

This TSX stock has seen shares rise higher, with demand for oil increasing, and yet the company could be in…

Read more »

Payday ringed on a calendar
Dividend Stocks

1 Passive-Income Stream and 1 Dividend Stock for $781.48 in Monthly Cash

Looking for passive income? Don't take out a loan with that high interest involved. Instead, consider this method for years…

Read more »

money cash dividends
Dividend Stocks

Pizza Stocks Are Actually Great for Passive Income: Who Knew?!

Pizza Pizza Royalty (TSX:PZA) may very well be the best inflation-fighting food stock out there on the TSX.

Read more »