TFSA Investors: How to Earn $350/Month in Passive Income

Are you looking to earn tax-free passive income? Here’s one simple way to earn $350/month with some top Canadian dividend stocks.

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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.

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.

COMPANYRECENT PRICENUMBER OF SHARESDIVIDENDTOTAL PAYOUTFREQUENCY
Pembina Pipeline$44.58657$0.6525$428.69Quarterly
TELUS$28.501,029$0.35$360.15Quarterly
Dream Industrial REIT14.881,971$0.05833$114.43Monthly
Prices as of April 19, 2023

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 Robin Brown has positions in Dream Industrial Real Estate Investment Trust. The Motley Fool recommends Dream Industrial Real Estate Investment Trust, Pembina Pipeline, and TELUS. The Motley Fool has a disclosure policy.

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