How to Turn $45,000 Into $334/Month Tax Free to Help With Monthly Expenses

Canadians who are battling rising costs can churn out tax-free passive income with help from stocks like Freehold Royalties Ltd. (TSX:FRU).

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Canadians were not given much time to celebrate the end of the COVID-19 pandemic. Instead, citizens were faced with new challenges in the form of soaring inflation and now the most aggressive interest rate tightening policy in the 21st century.

Back in February, Statistics Canada released a survey that showed one in four Canadians did not believe they could cover an unexpected expense of $500 or more. Meanwhile, 44% of those surveyed said they were concerned with their household’s ability to afford housing or rent.

Today, I want to explore how Canadians could pursue some relief by building a passive-income portfolio. Better yet, Canadians should build this income-oriented portfolio in a Tax-Free Savings Account (TFSA).

In our hypothetical, we will be utilizing slightly more than half of our cumulative TFSA room with $45,000. Let’s jump in.

This energy stock is a perfect hold for Canadian hungry for tax-free passive income

Freehold Royalties (TSX:FRU) is a Calgary-based company that 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. This energy stock is a fantastic target for investors who are on the hunt for a top income-producing stock. Its shares have dropped 4.4% in 2023 as of close on May 17.

This energy stock closed at $14.41 on Wednesday, May 17. For our hypothetical, we can snatch up 1,050 shares of Freehold Royalties for a purchase price of $15,130.50. Freehold Royalties last paid out a monthly distribution of $0.09 per share. That represents a very tasty 7.4% yield. This investment will allow us to generate monthly, tax-free passive income of $94.50 going forward.

Here’s a dirt-cheap REIT that offers a super dividend yield

Northwest Healthcare REIT (TSX:NWH.UN) is a Toronto-based real estate investment trust (REIT) that owns and operates a global portfolio of high-quality healthcare real estate. Shares of this REIT have dropped 3.8% month over month as of close on May 17. The stock has plunged 15% in the year-to-date period.

In the first quarter of fiscal 2023, this REIT delivered revenue growth of 10% to $102 million. Meanwhile, it posted same-portfolio occupancy of 97%. Total assets under management (AUM) climbed 23% to $9.5 billion.

Shares of this REIT closed at $7.97 on May 17. We can further bolster our passive-income portfolio with a purchase of 1,900 shares of Northwest REIT for a total of $15,143. The REIT last announced a monthly distribution of $0.06667 per share, which represents a monster 10% yield. This purchase will allow us to generate tax-free passive income of $127.30 per month.

One more high-yield stock that can help you churn out big, tax-free passive income in 2023

Timbercreek Financial (TSX:TF) is a Toronto-based mortgage investment company that provides shorter-duration structured financing solutions to commercial real estate investors across Canada. This dividend stock has plunged 8% over the past month. Its shares are still up 3.5% so far in 2023.

This stock closed at $7.55 on May 17. For our final purchase, we can grab 1,945 shares of Timbercreek for a total of $14,684.75. Timbercreek last paid out a monthly dividend of $0.058 per share, representing a superb 9.1% yield. This investment will allow us to generate tax-free passive income of $112.81 per month.

Bottom line


These investments will allow us to generate tax-free passive income of $334.61 every month. That works out to annual tax-free passive income of $4,015.32. This should help investors put a dent in their rising expenses in 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 Ambrose O'Callaghan has no position in any of the stocks mentioned. The Motley Fool recommends Freehold Royalties and NorthWest Healthcare Properties Real Estate Investment Trust. The Motley Fool has a disclosure policy.

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