TFSA Passive Income: How to Get $320 Per Month Tax Free for Decades

Here’s how TFSA holders can earn $320 in tax-free passive income for decades with dividend investing.

| More on:
Money growing in soil , Business success concept.

Image source: Getty Images

If you haven’t invested in dividend stocks from your TFSA (Tax-Free Savings Account) yet, you might be missing out on a great opportunity. While you can use your TFSA money to invest in growth stocks to expect outstanding returns in a short period of time, growth stocks tend to be highly volatile and could potentially increase your risks.

So, if you want to play it safe, it might be a good idea to include some fundamentally strong dividend stocks in your portfolio, which are usually less volatile than growth stocks. Besides that, investing in Canadian dividend stocks from your TFSA can also help you earn tax-free passive income.

In this article, I’ll highlight the reliable dividend stock that can help you earn a passive-income equivalent to $320 per month for decades.

A great dividend stock for TFSA investors

When investing in a dividend stock, TFSA investors should always look at its future growth outlook apart from its historical financial growth trends. This principle will help filter out fundamentally weak stocks, which could prove to be risky investments in the long run.

With that in mind, Keyera (TSX:KEY) could be a great dividend stock for TFSA investors to buy now and hold for decades to come. This Calgary-headquartered midstream oil- and gas-focused company currently has a market cap of $7.2 billion, as its stock trades at $31.10 per share with about 5.1% year-to-date gains. By comparison, Canada’s TSX Composite Index has risen 6.9% year to date.

At this market price, Keyera offers an attractive 6.2% annual dividend yield and currently distributes its dividend payouts every month. While it will continue to pay monthly dividends until March 2022, it’s important to note that the company recently announced a move to quarterly dividend payments starting from the second quarter of 2022 onwards.

What makes this dividend stock reliable?

In 2022, Keyera reported a solid 42% YoY (year-over-year) jump in its total revenue to $7.1 billion. Strong contributions of its gathering and processing and marketing segments drove its full-year adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) to a record $212.5 million, reflecting an 8% YoY increase.

To give you an idea about its long-term financial growth trends, Keyera’s revenue more than doubled in the last five years. Similarly, the energy firm’s adjusted EBITDA has grown positively by 67% in five years between 2017 and 2022. This positive growth has helped it raise its dividend per share by 16% during these five years.

Moreover, Keyera’s low-leveraged business model with high-quality assets, sustainable dividends, and a robust balance sheet makes it a reliable stock to consider investing in for the long term.

COMPANYRECENT PRICENUMBER OF SHARESDIVIDENDTOTAL PAYOUTFREQUENCY
Keyera Corp$31.102,000$0.16$320Monthly*
Prices as of Feb. 15, 2023,
*KEY will move to quarterly dividend payments from Q2 2023 onwards

Bottom line

If you buy 2,000 shares of Keyera with your TFSA money right now, you can expect to receive a tax-free, passive-income equivalent to $320 each month or $3,840 each year from its reliable dividends. To buy these many shares of Keyera at the current market price, however, you’ll have to invest $62,200 in the company. While this example gives you a good idea of how you can create a source of tax-free passive income by investing in quality dividend stocks, you should always remember to diversify your portfolio instead of relying on a single stock.

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.

The Motley Fool recommends Keyera. The Motley Fool has a disclosure policy. Fool contributor Jitendra Parashar has no position in any of the stocks mentioned.

More on Dividend Stocks

Redwood trees stretch up to the sunlight.
Dividend Stocks

2 TSX Growth Stocks Set Up for Outsized Gains in 2024

Considering the growth prospects that these two TSX stocks offer, I would keep a very close eye on them as…

Read more »

Growing plant shoots on coins
Dividend Stocks

3 Strong Dividend Stocks I’d Add to My Portfolio Right Now

Given their solid underlying businesses, stable cash flows, and high yields, these three dividend stocks are an excellent addition to…

Read more »

ETF chart stocks
Dividend Stocks

Got $500 to Invest in Stocks? Put It in This Index Fund

This ETF is one of the best options for those with a bit of cash, who don't want to worry…

Read more »

warning or alert
Dividend Stocks

Help! How Do I Get Rid of My Stock Duds?

Stock duds can prevent you from making really big returns and using that cash to fund future investments. How do…

Read more »

Senior Couple Walking With Pet Bulldog In Countryside
Dividend Stocks

Earn $200 a Month Without Lifting a Finger (Invest in Only These Dividend Stocks)

These three monthly paying dividend stocks would be ideal for income-seeking investors.

Read more »

Business success with growing, rising charts and businessman in background
Dividend Stocks

Want 5% Growth in 2024? It’s Now or Never With a GIC

Locking in a GIC now is the smartest move you can make with interest rates coming down, but consider these…

Read more »

Golden crown on a red velvet background
Dividend Stocks

3 Top Dividend Stocks to Start a Growing Passive Income Stream

Start a growing passive income stream with shares like Canadian Utilities that boast five decades of dividend growth.

Read more »

TFSA and coins
Dividend Stocks

TFSA Investors: Where to Put $7,000 in 2024

These top TSX dividend stocks now offer yields near 8%.

Read more »