TFSA Investors: Invest $45,000 for $3,504 in Annual Income

The Tax-Free Savings Account (TFSA) was introduced by the federal government all the way back in January 2009. When it was first introduced, the annual contribution room in a TFSA stood at $5,000. Since then, the federal government has increased the cumulative contribution room to $88,000. The current annual contribution limit sits at $6,500.

The TFSA is typically referenced for the tax-free capital growth it can offer over the long term. However, this registered account can also be a phenomenal vehicle for investment income.

Today, I want to discuss how we can look to generate $3,504 in annual income starting with $45,000 to invest. Let’s jump in.

This monthly dividend stock is perfect to start an income-oriented TFSA

Extendicare (TSX: EXE) is a Markham-based company that provides care and services for seniors through its subsidiaries in Canada. Shares of this dividend stock have increased 4.3% month over month as of close on Monday, May 8. The stock is up 3% so far in 2023. However, as investors can see from the interactive price chart below, Extendicare is still down 3.7% in the year-over-year period.

In the fourth quarter (Q4) of fiscal 2022, Extendicare saw its average long-term-care (LTC) occupancy rise 100 basis points (bps) to 94.5%. Moreover, home healthcare average daily volumes (ADV) increased 2% from the previous quarter. For the full year, the company posted revenue growth of 4.7% to $1.22 billion.

Shares of Extendicare closed at $6.73 per share on Monday, May 8. In our hypothetical, we are going to snatch up 2,210 shares of Extendicare for a purchase price of $14,873.30. This stock offers a monthly distribution of $0.04 per share. That represents a superb 7.1% yield. The investment will allow us to generate monthly passive income of $88.40 in our TFSA. That works out to tax-free annual income of $1,060.80.

Here’s an undervalued REIT that can deliver strong monthly income in 2023

Artis REIT (TSX: AX.UN) is a Winnipeg-based real estate investment trust (REIT) that boasts a portfolio of industrial, office, and retail properties in Canada and the United States. This REIT has dropped 7% over the past month. Its shares are now down 24% so far in 2023.

Investors got to see this REIT’s final batch of fiscal 2022 earnings on February 28, 2023. In fiscal 2022, Artis REIT saw revenues drop to $372 million compared to $419 million in the previous year.

This REIT closed at $6.90 per share on Monday, May 8. We are seeking to build a strong passive-income portfolio, so we should look to purchase 2,200 shares of Artis for a total price of $15,180. This REIT offers a monthly dividend of $0.05 per share, which represents a monster 8.7% yield. We can now churn out monthly passive income of $110 in our TFSA. This works out to annual income of $1,320.

One more super income stock I’d snatch in our TFSA today

Freehold Royalties (TSX: FRU) is the third and final dividend stock I’d look to stash in our TFSA to generate big annual income in 2023 and beyond. This Calgary-based company is engaged in the acquisition and management of royalty interest in the crude oil, natural gas, natural gas liquids, and potash properties in Western Canada and the United States. Shares of Freehold have dropped 4.7% in the year-to-date period.

Shares of this energy stock closed at $14.37 on Monday, May 8. For our hypothetical TFSA, we are going to snatch up 1,040 shares of Pembina for a purchase price of $14,944.80. This stock last paid out a monthly dividend of $0.09 per share, representing a very tasty 7.5% yield. We can now generate monthly passive income of $93.60 in our TFSA. That works out to annual income of $1,123.20.

Conclusion

These investments will allow us to generate tax-free passive income of $292 every month. Moreover, that works out to annual income of $3,504 in our TFSA.