Passive income is consistently sought after by investors and non-investors alike. Indeed, the establishment of consistent passive income is typically the first step toward financial freedom. Our retirement plans aim to build a nest egg that is large enough to provide suitable passive income to live comfortably for the rest of our lives. Today, I want to discuss how you can churn out passive income much earlier and at an attractive clip.
In this hypothetical, we are going to look to generate our passive income in a Tax-Free Savings Account (TFSA). This will allow us to generate passive income that will be entirely tax free. We are going to start with a $20,000 investment. How much can this churn out for us each month? Let’s jump in!
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This top healthcare REIT offers big dividends right now
Northwest Healthcare REIT (TSX:NWH.UN) is a Toronto-based real estate investment trust (REIT) that owns and operates a global portfolio of high-quality healthcare real estate. This REIT proved to be a reliable and lucrative investment during the COVID-19 pandemic. Investors should remain bullish on the exciting healthcare space in 2023.
Investors can expect to see Northwest’s fourth-quarter (Q4) and full-year fiscal 2022 earnings by the middle of March. In the third quarter of fiscal 2022, the company delivered revenue growth of 21% to $115 million. Meanwhile, it posted same-property net operating income (NOI) growth of 2.5% compared to the previous year. Moreover, total assets under management (AUM) increased 24% to $10.6 billion. Overall, investors should feel good about Northwest’s prospects going forward.
Shares of Northwest Healthcare REIT closed at $9.69 on Tuesday, February 21. In our hypothetical, we can snatch up 1,035 shares of Northwest in our TFSA for a purchase price of $10,029.15. This REIT offers a monthly distribution of $0.067 per share. That represents an 8.1% yield. This means we can now churn out TAX-FREE monthly passive income of $69.34 going forward.
Here’s another stock that can deliver big passive income this year
Timbercreek Financial (TSX:TF) is a Toronto-based mortgage investment company that provides shorter-duration structured financing solutions to commercial real estate investors across Canada. Its shares have dropped 15% year over year as of close on February 21. The stock has jumped 12% so far in 2023.
This company is set to unveil its final batch of fiscal 2022 earnings this week. In Q3 2022, Timbercreek reported net mortgage investments of $1.25 billion compared to $1.09 billion in the previous year. Meanwhile, adjusted net income rose from $13.7 million in the third quarter of fiscal 2021 to $13.9 million, or $0.17 per share, in this most recent quarter.
Timbercreek stock closed at $8.21 on February 21. We can purchase 1,214 shares of Timbercreek for a total price of $9,966.94. This dividend stock offers a monthly distribution of $0.058 per share, which represents a monster 8.4% yield. Our purchase will allow us to generate passive income of $70.41 every month. And in case you forgot … that income is tax free!
Bottom line
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY |
| NWH.UN | $9.69 | 1,035 | $0.067 | $69.34 | Monthly |
| TF | $8.21 | 1,214 | $0.058 | $70.41 | Monthly |
Our original $20,000 investment will now allow us to churn out monthly passive income of $139.75 going forward. That works out to annual passive income of $1,677.
