If you’re looking to create passive income each month tax free right now, I’m not going to lie. Now is certainly a great time to pick up cheap stocks, but it’s a toss up in many cases as to which dividend stocks are safe, and which are set to drop further.
So today, let’s get into a safe choice for your passive income portfolio. Then, we’ll look at how to create that income both right away, and in the years to come through reinvestment.
Making it tax free
First off, make sure you’re set up with a Tax-Free Savings Account (TFSA). This will ensure that any income you’re making isn’t subjected to taxes. But be careful! If you’ve already taken out cash this year, then you may not be able to invest a lot into your TFSA right now.
The best option is to call up the Canada Revenue Agency (CRA) or your financial institution where your TFSA is. An advisor can tell you exactly how much room there is in your TFSA, and provide you with numbers on how much you can add in and how much you can take out without penalties.
Furthermore, don’t simply visit the My Account on CRA and assume that’s the number! Unfortunately, these numbers are in many cases not up to date, as your financial institution has to provide them to the CRA. So again, make the call.
Choosing a strong stock
If you are seeking a strong stock with a solid dividend, you want to find a company that’s in a stable industry. This would include those like utilities, infrastructure, banking, and energy as some examples. For me, I would go with an option such as Brookfield Renewable Partners LP (TSX:BEP.UN).
Brookfield stock is a strong energy stock in the renewable energy sector. It has assets located around the world, and in every area of renewable energy. From hydro utilities to uranium reactors, Brookfield stock has it all.
Yet shares have dropped since President Biden came into office, after peaking in 2021. Shares are now down 12% in the last year, but up 17% year to date as of writing. You can also grab a dividend yield at 4.4% right now as well.
Creating passive income
Now granted, Brookfield stock isn’t a monthly payer. However, we can still figure out how much we can make per month considering the stock itself. So let’s look at this next.
Let’s say you want to add $75 to your account through dividend passive income each and every month. Here’s what that would look like from just dividends.
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY | TOTAL INVESTMENT |
| BEP.UN | $41.69 | 489 | $1.84 | $900 | quarterly | $20,386.41 |
But what if we threw some returns in there? Brookfield stock is down 12% in the last year, so what if it were to pop back up with just a $10,000 investment?
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY | TOTAL INVESTMENT |
| BEP.UN | $41.69 | 240 | $1.84 | $441.60 | quarterly | $10,000 |
| BEP.UN – 12% up | $46.69 | 240 | $1.84 | $441.60 | quarterly | $11,205.60 |
With returns included, you would have a portfolio worth $11,205.60 when it rises 12%. Add in dividend income, and that’s $11,647.20, a total return of $1,647.20. Divide those returns each month and you could receive $137.27 each and every month!
