Passive Income: How to Make $137 per Month Tax Free

Canadians seeking passive income each month can go about it in two ways, but you’ll need a TFSA and a strong stock to get started.

| More on:
alcohol

Image source: Getty Images

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.

COMPANYRECENT PRICENUMBER OF SHARESDIVIDENDTOTAL PAYOUTFREQUENCYTOTAL INVESTMENT
BEP.UN$41.69489$1.84$900quarterly$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?

COMPANYRECENT PRICENUMBER OF SHARESDIVIDENDTOTAL PAYOUTFREQUENCYTOTAL INVESTMENT
BEP.UN$41.69240$1.84$441.60quarterly$10,000
BEP.UN – 12% up$46.69240$1.84$441.60quarterly$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!

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 Amy Legate-Wolfe has positions in Brookfield Renewable Partners. The Motley Fool recommends Brookfield Renewable Partners. The Motley Fool has a disclosure policy.

More on Energy Stocks

Gas pipelines
Stocks for Beginners

3 Reasons to Buy Enbridge Stock Like There’s No Tomorrow

Enbridge (TSX:ENB) is a superb long-term option. Here's why you should buy Enbridge stock right now and hold it for…

Read more »

potted green plant grows up in arrow shape
Energy Stocks

1 Ridiculously Undervalued Growth Stock Down 40% to Buy Hand Over Fist

Don’t miss your chance to load up on this high-yielding, renewable energy growth stock.

Read more »

A solar cell panel generates power in a country mountain landscape.
Energy Stocks

1 Renewable Energy Stock to Buy and Hold

Here's why Brookfield Renewable (TSX:BEP.UN) is a top renewable energy stock long-term investors should consider.

Read more »

financial freedom sign
Energy Stocks

Could Investing $10,000 in Enbridge Make You a Millionaire?

A top-tier dividend stock can help you accumulate wealth or become a millionaire over time.

Read more »

Aerial view of a wind farm
Energy Stocks

Brookfield Renewable Stock Climbs Higher: Time to Buy?

Brookfield Renewable stock (TSX:BEP.UN) continues to climb, but remains below the $40 mark. But that share price looks in view.

Read more »

Nuclear power station cooling tower
Energy Stocks

Up 35%, Is Cameco Stock a Buy in June 2024?

When a stock is bullish, and you have missed the starting point of the trend, it can be challenging to…

Read more »

Oil pumps against sunset
Energy Stocks

4 Top Energy Stocks (With Dividends) to Buy and Hold Forever

These four energy stocks are the best way to get in on long-term income from both growth and dividends.

Read more »

Man considering whether to sell or buy
Energy Stocks

Cameco Stock: Buy, Sell, or Hold?

Cameco stock (TSX:CCO) has risen by above 80% in the last year alone, and 14% in the last month. Will…

Read more »