Earning tax-free passive income is easier than many Canadians might think. When you utilize all your TFSA (Tax-Free Savings Account) contribution space, you can put up a total of $88,000 to work earning investment income.
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Keep 10-25% more by using your TFSA
When you pay no tax on your passive income, you can keep upwards of 10-25% more income. Over a long investment horizon, the extra money you keep can really add up. That is why the TFSA is a crucial element in any Canadian’s wealth-building toolbox.
If you have $88,000 to put to work today, we recommend Foolish investors buy a diversified portfolio of at least eight to 20 stocks. If you are looking for some dividend stock ideas, here’s a three-stock mini portfolio that could earn an average of $375 per month inside a TFSA.
An infrastructure stock for high passive income
Pembina Pipeline (TSX: PPL) is a quality stock for passive income. It is a leading provider of energy infrastructure in Western Canada. It provides a one-stop egress and processing shop for Canadian oil and natural gas producers. The great thing is around 85% of its earnings comes from its contracted pipeline and midstream assets.
Its current 5.86% dividend is fully covered by these contracted earnings. The company has been very conservative, and it has a solid balance sheet. It is in a strong position to grow from rising LNG (liquified natural gas) investments in British Colombia.
If you put $29,333 (one-third of the $88,000 contribution limit) into Pembina stock, you’d earn $428.69 of quarterly passive income. That would equal $142.90 averaged monthly.
A telecom for solid dividend growth
Another TFSA dividend stock you could hold for years is TELUS (TSX: T). Internet and cellular/data services are as essential as heat and power in today’s modern world. That is why TELUS can provide investors a steady stream of growing passive income.
TELUS has been very strategic about its infrastructure investments. It has focused on building out fibre optic across its network. This has given it a unique competitive advantage.
Likewise, it has been investing excess cash into several digital service businesses. These provide a diverse array of essential services that are growing at an even faster rate than TELUS’s telecom business.
Today, you can buy TELUS stock with a 4.95% dividend yield. If you put one-third of your total TFSA contribution into TELUS, you would earn $360.15 of quarterly passive income. Averaged monthly, that would equal $120.05. TELUS has a great track record growing its dividend, so investors could get some nice income upside.
A real estate stock for monthly passive income
Another good passive-income stock is Dream Industrial Real Estate Investment Trust (TSX: DIR.UN). With a market cap of $4.1 billion, it is one of the largest Canadian stocks focused on industrial (warehousing, logistics, distribution, and manufacturing) properties.
Dream has an extremely well-located portfolio across Canada and Europe. It also manages two joint-venture partnerships in Canada and the United States. The real estate investment trust has been enjoying extremely strong demand and elevated rental rate growth. That has translated into high single-digit cash flow per unit growth over the past few years.
This passive-income stock yields 4.7% now. A $29,333 investment would earn $114.43 of monthly income.
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY |
| Pembina Pipeline | $44.58 | 657 | $0.6525 | $428.69 | Quarterly |
| TELUS | $28.50 | 1,029 | $0.35 | $360.15 | Quarterly |
| Dream Industrial REIT | 14.88 | 1,971 | $0.05833 | $114.43 | Monthly |
