TFSA Couples: How to Make $800/Month in Tax-Free Income

With a cumulative contribution room of $176,000 TFSA couples can easily generate more than $800 in monthly dividend income.

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In 2023, the maximum cumulative contribution towards the Tax-Free Savings Account, or TFSA, has increased to $88,000 for individuals. So, for Canadian couples, this contribution amount will double to $176,000.

You can use this TFSA contribution room to create a passive income stream by purchasing quality dividend-paying stocks. Typically, dividend-paying companies make profits, a portion of which is distributed to shareholders via dividends. While most dividend stocks on the TSX have a quarterly payout, a few also pay shareholders a monthly dividend.

Canadian Tire$164.74356$1.725$614Quarterly

Long-term investors can benefit from capital gains as well, in addition to regular dividend payouts. So, let’s see which dividend stocks can help TFSA couples earn $800/month in tax-free income.

Enbridge stock

A well-diversified energy infrastructure giant, Enbridge (TSX:ENB) currently offers investors a dividend yield of 7.1%. Its wide base of cash-generating assets has allowed the energy company to increase dividends for 28 consecutive years.

Enbridge transports 30% of the oil produced in North America, as well as 20% of the natural gas consumed in the United States. The TSX company has a resilient business model as 98% of its cash flows are contracted and indexed to inflation, making it immune to fluctuations in commodity prices.

Enbridge also aims to gain traction in the clean energy sector. It currently owns and operates 17 solar facilities, 23 wind farms, a geothermal facility, one hydro facility, and five waste heat recovery facilities.

Down 23% from all-time highs, ENB stock is priced at 16.9 times forward earnings, which is quite reasonable.

Canadian Tire stock

Among the most popular retail companies in Canada, Canadian Tire (TSX:CTC.A) offers shareholders a dividend yield of 4.2%. In the last 10 years, CTC stock has returned 198% to investors, while the TSX index has surged 113% in this period after adjusting for dividends.

Down 25% from all-time highs, Canadian Tire stock is priced at 9.4 times forward earnings. Analysts expect the TSX stock to gain another 20% in the next 12 months. Analysts expect a 6% fall in earnings for Canadian Tire, but the bottom line is all set to accelerate by more than 30% annually between 2023 and 2027.

Telus stock

The final dividend stock on my list is Telus (TSX:T), one of the largest telecom companies in Canada. Valued at a market cap of almost $40 billion, Telus stock offers you a tasty dividend yield of 5.2%.

While Telus is part of a mature and slow-moving sector, its customer additions for 2022 totalled over 1 million on the back of bundled product offerings and its focus on improving customer experiences.

Telus now expects to increase operating revenue between 11% and 14%, while adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) is forecast to expand between 9.5% and 11% in 2023.

Its free cash flow is estimated at $2 billion, allowing the company to keep increasing dividend payouts in the next 12 months.

The Foolish takeaway

Investing an amount equal to $58,666 in these three TSX stocks will allow you to earn $9,936 in annual dividends, indicating a monthly payout of $828. You can use this article as an example identify similar quality dividend stocks and create a robust portfolio for your TFSA.

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 positions in Enbridge. The Motley Fool recommends Enbridge and TELUS. The Motley Fool has a disclosure policy.

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