The establishment of a sizable passive-income cash stream should always be a goal that investors set for themselves. Passive income does not come from regular employment, rather it is unearned income that is generated with minimal labour. Rental income, royalties from a novel or television series, and the flipping of retail products are all examples of passive income.
Today, I want to explore how you can make over $600 per month tax free by targeting the right equities in your Tax-Free Savings Account (TFSA). In this hypothetical, we are going to be using all the cumulative room that is available in a 2023 TFSA: $88,000. Let’s jump in!
This green energy stock is the first target for our passive-income portfolio
TransAlta Renewables (TSX: RNW) is a Calgary-based company that owns, develops, and operates renewable and natural gas power-generation facilities and other infrastructure assets in North America and Australia. Shares of this dividend stock have climbed 5% month over month as of close on April 18. The stock is now up 10% so far in 2023.
Investors got to see this company’s final batch of fiscal 2022 earnings on February 23. The company achieved adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) growth of 5% to $487 million for the full year. Meanwhile, it reported cash flow from operating activities of $257 million.
This stock closed at $12.55 per share on April 18. For our hypothetical, we can snatch up 2,335 shares of TransAlta Renewables for a purchase price of $29,304.25. TransAlta offers a monthly dividend of $0.078 per share. That represents a very strong 7.4% yield. Indeed, this purchase will allow us to generate tax-free passive income of $182.13 going forward.
Here’s an undervalued REIT that offers big income right now
Northwest Healthcare REIT (TSX:NWH.UN) is a real estate investment trust (REIT) that is based in Toronto and owns and operates a global portfolio of high-quality healthcare real estate. This stock has moved up marginally over the past month. Its shares have dropped 11% in the year-to-date period.
In the fourth quarter (Q4) of 2022, this company posted revenue growth of 23% to $118 million. Moreover, it delivered adjusted funds from operations (AFFO) per unit of $0.17. For the full year, AFFO rose to $0.73 per unit.
Northwest REIT closed at $8.38 on Friday, April 18. We can look to purchase 3,500 shares of Northwest REIT for a total of $29,330. This REIT last paid out a monthly distribution of $0.067 per share, which represents a monster 9.5% yield. TFSA investors should rejoice, as this means we can now generate monthly passive income of $234.50.
One more passive-income beast that will help you reach the $620/month goal
Sienna Senior Living (TSX: SIA) is the third dividend stock I’d target to round out our TFSA passive-income portfolio. This Markham-based company provides senior living and long-term-care (LTC) services in Canada. Its shares have dipped marginally so far in 2023. The stock is down 26% year over year.
Shares of Sienna Senior Living closed at $11.01 on Friday, April 18. For our hypothetical, we can buy 2,665 shares of Sienna for a purchase price of $29,341.65. This stock offers a monthly dividend of $0.078 per share, representing a super 8.5% yield. The investment allows us to make tax-free monthly passive income of $207.87.
Conclusion
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY |
| RNW | $12.55 | 2,335 | $0.078 | $182.13 | Monthly |
| NWH.UN | $8.38 | 3,500 | $0.067 | $234.50 | Monthly |
| SIA | $11.01 | 2,665 | $0.078 | $207.87 | Monthly |
These investments in our TFSA will now allow us to make $624.50 in monthly passive income going forward. That is a nice chunk of change to rely on in a shaky market.
