The TFSA (Tax-Free Savings Account) is the ideal place to build a passive-income portfolio for retirement. All income earned in the account is tax free. Likewise, if you ever need to withdraw funds from the account, there is no tax implication.
By paying no tax on investment income, you can keep as much as 10-15% more of your annual returns. So, the TFSA is definitely a smart place to start building a passive-income stream for retirement. If you were looking to earn $250 per month in retirement, it might not be as challenging as it sounds.
Build up to $60,000 to earn over $250/month in a TFSA
Right now, the TFSA allows for a total contribution of $88,000. That may not be attainable for many Canadian investors immediately. However, say you only start with $30,000. If you contribute $500 to your TFSA every month, you’ll have $60,000 in total in five years.
There are plenty of quality Canadian dividend stocks yielding around 5% today. If you could collect that yield on $60,000, you could easily earn $265 of monthly passive income. If that sounds appealing, here are three stocks I’d consider for a TFSA retirement portfolio.
An energy stock with a big dividend
Pembina Pipeline (TSX:PPL) earns a 5.88% dividend yield right now. With $20,000, you could buy 456 shares of Pembina Pipeline stock in your TFSA. With the stock paying a $0.6525 dividend every quarter, an investor would earn $297.54 per quarter, or $99.18 averaged month.
While Pembina is considered an energy stock, around 85% of its earnings come from long-term contracts. That means that even if oil prices were to dip, its dividend is backstopped by its contracted assets.
Pembina provides a diverse array of energy infrastructure across Western Canada. Its Cedar LNG project was just approved for construction by provincial regulators, so that could provide a meaningful long-term growth opportunity. For an infrastructure stock, the company has a good balance sheet, so it should be able to fund its growth plans without much shareholder dilution.
A telecom stock at a fair price
Another great TFSA stock for dividends is TELUS (TSX:T). It earns a 5.3% dividend yield today. A $20,000 investment would buy 746 shares in TELUS. With the stock paying $0.35 quarterly, investors would earn $261.10 quarterly, or $87.03 averaged monthly.
TELUS is a leading telecommunications stock in Canada for several reasons. Firstly, it has delivered superior earnings and cash flow growth for the past several years. Second, it has a strong brand, great assets, and market-leading customer growth.
Third, it has innovated into various digital vertical businesses that are supplementing growth. Fourth, the company has a great track record of growing its dividend by around 7% a year. All in all, TELUS is a great income stock for a TFSA. Its valuation is reasonable today.
A solid infrastructure stock for a TFSA
Brookfield Infrastructure Partners (TSX:BIP.UN) is another good TFSA stock trading with a 4.75% dividend yield. You could buy 457 units of BIP stock with $20,000. That investment would earn $238.78 per quarter, or $79.59 averaged monthly.
If you want a stock with a diverse portfolio of defensive assets, this is one to hold. Brookfield owns everything from cell towers to pipelines to ports to utilities. These assets are largely contracted. A good portion of these assets capture growing inflation-indexed earnings.
The company has a solid balance sheet, so recent stock market distress could present some very attractive buying opportunities. This TFSA stock has a good history of growing its divided by around 6-9% annually, so there is some good income upside ahead.
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY |
| Pembina Pipeline | 43.83 | 456 | $0.6525 | $297.45 | Quarterly |
| TELUS Corp. | 26.78 | 746 | $0.35 | $261.10 | Quarterly |
| Brookfield Infrastructure Partners | 43.76 | 457 | $0.5225 | $238.78 | Quarterly |
