Got $6,500? Earn $48/Month Tax-Free Passive Income

High-dividend-paying Canadian stocks include Diversified Royalty. Let’s see how a TFSA investment of $6,500 can help you earn $48 in monthly dividends.

| More on:
Canadian Dollars

Image source: Getty Images

It’s beneficial to hold dividend stocks in your TFSA (Tax-Free Savings Account) for several reasons. First, companies that pay investors a dividend generally report consistent profits across market cycles, allowing them to outpace broader markets over time. Second, in addition to a regular dividend payout, long-term shareholders can also benefit from capital gains.

The TFSA is a tax-sheltered account, which means any returns from dividends, capital gains, and even interest are exempt from Canada Revenue Agency taxes. In 2023, the maximum contribution room in your TFSA is $6,500, which can be used to create a basket of income-generating dividend-paying TSX stocks.

With these factors in mind, here are three high-yield TSX stocks you can buy with $6,500 in March 2023.

Diversified Royalty stock

A multi-royalty company, Diversified Royalty (TSX:DIV) offers investors a dividend yield of 7.8%. It is engaged in the acquisition of royalty-based, multi-location businesses and franchisors in North America.

Diversified Royalty owns several royalty companies, such as Mr. Lube, AIR MILES, Stratus Building Solutions, and Nurse Next Door.

It reported revenue of $45.2 million in 2022, an increase of 21% year over year. Its adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) stood at $50.2 million — up 19% compared to 2021.

With a payout ratio of 82%, investors can expect dividends to increase, especially if the company continues to improve profitability. Valued at 15 times forward earnings, DIV stock is trading at a discount of 30%, given consensus price target estimates.

Boston Pizza Royalties Income stock

The reopening of economies and relaxation of COVID-19 restrictions allowed Boston Pizza Royalties (TSX:BPF.UN) to increase 2022 sales by 30% to $855 million. The fund declared distributions of $25.8 million, or $1.199 per unit in 2022, up from $18.5 million, or $0.860 per unit, in 2021.

Boston Pizza’s dividend yield currently stands at 7.8%. Priced at 11.5 times forward earnings, Boston Pizza stock is trading at a discount of 30%, given consensus estimates.

Fiera Capital

An asset-management company, Fiera Capital (TSX:FSZ) generates revenue from management fees and performance fees. So, its sales are directly related to the assets held under management. In a bull run, Fiera Capital and its peers experience record inflows of cash. But during bear markets, its AUM, or assets under management, moves significantly lower.

An uncertain macro environment is forecast to lower Fiera’s adjusted earnings per share to $1.16 per share. But FSZ stock is currently down 41% below all-time highs, increasing its dividend yield to more than 11%.

The TSX stock is valued at just 6.7 times forward earnings and is among the cheapest stocks in Canada. A double-digit yield is quite attractive for investors, especially if equity markets stage a rebound in the second half of 2023.

Bay Street expects Fiera Capital stock to gain another 20% in the next 12 months. After accounting for its dividends, total returns are closer to 32%.

The Foolish takeaway

Each of the three TSX stocks discussed here pay investors a tasty dividend. If you distribute $6,500 equally in these three stocks, the average dividend yield is 8.83%, resulting in annual payouts of $574, or $48 per month.

COMPANYRECENT PRICENUMBER OF SHARESDIVIDENDTOTAL PAYOUTFREQUENCY
Diversified Royalty$3.03714$0.02$14.28Monthly
Boston Pizza Royalties$15.10143$0.102$14.58Monthly
Fiera Capital$7.71$281$0.215$60.4Quarterly

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.

Fool contributor Aditya Raghunath has no position in any of the stocks mentioned. The Motley Fool recommends Fiera Capital. The Motley Fool has a disclosure policy.

More on Dividend Stocks

Man considering whether to sell or buy
Dividend Stocks

Royal Bank of Canada Stock: Buy, Sell, or Hold?

Royal Bank of Canada (TSX:RY) has a high dividend yield. Should you buy it?

Read more »

Businessman looking at a red arrow crashing through the floor
Dividend Stocks

BCE’s Stock Price Has Fallen to its 10-Year Low of $44: How Low Can it Go?

BCE stock price has dipped 39% in two years and shows no signs of growth in the next few months.…

Read more »

Dollar symbol and Canadian flag on keyboard
Dividend Stocks

Invest $10,000 in This Dividend Stock for $3,974.80 in Passive Income

This dividend stock gives you far more passive income than just from dividends alone, so consider it if you want…

Read more »

Payday ringed on a calendar
Dividend Stocks

This 6% Dividend Stock Pays Cash Every Month

Can a 6% dividend yield help you build a monthly retirement income? An investment made right can help you build…

Read more »

Payday ringed on a calendar
Dividend Stocks

Passive Income: How Much Should You Invest to Earn $1,000 Every Month?

These three monthly-paying dividend stocks can help you earn a monthly passive income of $1,000.

Read more »

Dividend Stocks

3 Dividend Stocks to Double Up on Right Now

Some of these dividend stocks will take longer to recover than others, but they'll certainly pay you to stick around.

Read more »

TFSA and coins
Dividend Stocks

TFSA Passive Income: How Much to Invest to Earn $250/Month

Want to earn $250/month of tax-free passive income? Here are four Canadian dividend stocks to look at buying in your…

Read more »

stock analysis
Dividend Stocks

Meta Is Now a Dividend Stock, but This TSX Stock Is a Better Buy

Social media giant Meta is now a dividend payer but a TSX stock is a better buy for its 156-year…

Read more »