TFSA Investors: Create $5,000 in Passive Income in 2023

TFSA investors who want passive income should definitely take a look at this cheap stock offering a high yield for a fair price.

Amy Legate-Wolfe

Author Bio Amy became interested in investing in 2018 after having her first daughter. After receiving a masters degree in journalism from Western University, she became frustrated that the finance industry remained a confusing place for Canadians like her: new parents, millennials, and other young people who needed to understand their finances. Now, Amy focuses on tech companies and renewable energy for growth opportunities, coupling that with long-term investing strategies and equities. She also provides investors with a daily newsletter, Canada Stock Digest, for daily market updates. Her work can also be found at Canada's National Observer, where she writes on the business side of climate action. Before joining Motley Fool Canada, Amy wrote for major news organizations including HuffPost, CTVNews.ca, and CBC. When she’s not researching investing strategies, Amy’s time is pretty much monopolized by her two wild daughters, but in what little spare time she has she loves to do yoga, go on walks with her dog, and travel with her husband. Social Media Follow Amy on LinkedIn and Canada Stock Digest. Favorite Investment Quote “October: This is one of the particularly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February.” – Mark Twain

Published March 1, 2023 5:00 pm EST

The Tax-Free Savings Account (TFSA) is one of the best ways to create passive income for investors. The reason is in the name itself, of course. No taxes on your passive income means you could invest cash and look forward to fixed income each year, quarter, or even month!

Such is the case for this passive income stock for TFSA investors. If you want monthly passive income that totals up to $5,000 each year, it’s certainly one of the best ones out there.

High dividends, low price

While a cheap stock with a high dividend yield isn’t always a great choice, it’s certainly one to consider when the fundamentals are right. Such is the case for Timbercreek Financial (TSX: TF). Timbercreek stock provides passive income of $0.69 per share. This comes from an 8.49% dividend yield at the time of writing this article.

What’s more, TFSA investors should consider that Timbercreek stock currently trades in value territory. You can bring in passive income while it continues to trade at just 15.5 times earnings. All while shares continue to trade down 6.4% over the last year.

Yet, that trading price doesn’t look like it’s going to last long. Shares of Timbercreek stock are already on the climb, up 18.4% since the beginning of 2023. And over time, TF stock has been even more impressive, with shares up 67% in the last decade alone.

More growth to come?

Analysts predict that Timbercreek and other similar financial stocks will see shares climb higher within the next year, but perhaps not right away. That’s simply because of the current market environment. Stocks such as this one tend to fluctuate more in a volatile scenario, and its recent earnings report didn’t help.

Timbercreek stock certainly had something to celebrate, announcing net investment income up 39.7% to $31.3 million, which was a record for the quarter and year at $109.8 million! The real estate asset manager maintained its healthy mortgage portfolio, but continued to take out provisions in the “challenging operating environment.” So while the company has a balance sheet to support short-term issues, there could be a bumpy path ahead.

The big issue was that the company missed earnings estimates, coming in at $0.17 earnings per share (EPS) instead of the predicted $0.20 EPS. While this didn’t lead to any downgrades, it did put investors a bit on edge.

So get in on the deal!

TFSA investors looking for solid long-term income should, therefore, consider now a great time to pick up the stock at a deal. You can get it in value territory, and bring in passive income for far less than it might cost when the stock recovers completely. So here is how much you would need to invest for $5,000 in annual income.