Any chance to earn tax-free passive income, should be an opportunity that Canadian investors maximize. Fortunately, Canadians can do just that by investing in stocks through their TFSA (Tax-Free Savings Account).
Pay no tax and grow your passive income
Whenever you invest in your TFSA all income earned has no tax consequence. There is no reporting to CRA (Canada Revenue Agency), and no tax is paid. It’s a great gift from the government to help Canadians grow and build their lifetime savings.
The current total TFSA contribution limit is $88,000. Say you only have $50,000 to invest, here is a three-stock mini portfolio that generates attractive passive income and could earn as much as $209.26 averaged monthly.
A top energy stock for any TFSA wanting passive income
Canadian Natural Resources (TSX:CNQ) might be a cyclical energy stock, but it is a dividend-paying all star. The company has paid and grown its dividend for 23 years. In fact, its base dividend has risen by a +20% compounded annual growth rate in that time.
CNQ is an incredibly well-managed energy production company. Its operations are extremely efficient and low cost. Likewise, it has multiple decades of reserves, which should ensure its operational longevity. Lastly, its management team is heavily invested alongside shareholders. Their incentive to deliver strong returns for shareholders are the same as yours.
At $59.17 per share, CNQ stock trades with a 4.5% dividend yield. A $16,666 investment in this stock would earn $177.03 of quarterly passive income in your TFSA. Averaged monthly, that would equal $59.01.
A top infrastructure stock in Canada
If you are looking for a little bit higher dividend yield, Pembina Pipeline (TSX:PPL) is another good stock for a TFSA. With a market cap of $25 billion, it is one of the largest energy infrastructure players in Western Canada. It owns and operates pipelines, midstream and gas processing plants, storage facilities, and propane export terminals.
Oil prices have remained relatively resilient, even despite concerns around the economy. That should continue to be a tailwind for Pembina’s business, especially as energy production activity continues to grow in Western Canada. It is particularly well positioned to benefit from the potential to export LNG over the coming few years.
This TFSA stock earns a 5.75% dividend yield at a price of $46.20. A $16,666 investment in Pembina would earn $234.90 of tax-free passive income every quarter, or $78.3 averaged monthly.
A top telecom stock for any TFSA
TELUS Corp. (TSX:T) is a good stock pick for earning TFSA passive income. Its business has a great combination of income, growth, and safety. TELUS’s primary business is providing cellular and internet services to subscribers across Canada. Its revenues are derived from an essential, contracted service, so it has a predictable sightline as to its profits and cash flows.
TELUS is unique in that it is integrating its services across several digital mediums. These include security and home automation, agriculture, healthcare and benefits, and IT/customer experience/artificial intelligence. At a price of $27 per share, the stock is barely factoring the imbedded, outsized growth within these businesses.
Today, this TFSA stock earns a 5.18% dividend yield. Put $12,500 to work in TELUS stock and you’d earn $215.60 every quarter, or $71.87 monthly. TELUS has a great history of growing its dividend by over 6% a year, so investors get the bonus of growing passive income if they are patient with this stock.
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY |
| Canadian Natural Resources | $59.17 | 281 | $0.63 | $177.03 | Quarterly |
| Pembina Pipeline | $46.20 | 360 | $0.6525 | $234.90 | Quarterly |
| TELUS Corp. | $27.05 | 616 | $0.35 | $215.60 | Quarterly |
