TFSA: How to Create $500 in Income Each Month for Retirement

Monthly paying dividend stocks add to your income post-retirement. Thus, investing in the shares of fundamentally strong Canadian corporations offering reliable payouts appears attractive. Further, investing in these stocks via your TFSA (Tax-Free Savings Account) can help you earn tax-free cash every month. 

However, retirees should take caution before investing, as dividend payouts are not guaranteed. Thus, one should focus on companies with the ability to pay their dividends in all market conditions. Against this background, I’ll discuss two Canadian dividend stocks that could help TFSA investors earn $500 in monthly income. 

SmartCentres

Real estate investment trusts, or REITs, usually have high payout, making them an attractive investment option for investors seeking regular income. Among top Canadian REITs, investors could consider investing in SmartCentres (TSX: SRU.UN). 

SmartCentres is the leading fully integrated REIT in Canada with an extensive portfolio of income-producing properties, including retail and office space. It benefits from its industry-leading occupancy level of 98% and the high-quality tenant base that drives its cash flows and positions the company to enhance its shareholders’ returns. 

It’s worth highlighting that its top customers include essential services providers, including large and creditworthy retailers. This adds stability and visibility to its cash flows. Also, most of SmartCentres’s debt is of fixed rate, making it less susceptible to rising interest rates. Currently, SmartCentres offers a high yield of 7.3% (based on its closing price on June 9). 

Pizza Pizza Royalty 

Pizza Pizza Royalty (TSX: PZA) is another attractive stock to earn regular monthly cash. The company franchises quick-service restaurants and makes money through royalty income tied to the gross sales of its two brands, including Pizza Pizza restaurants and Pizza 73 restaurants. 

The company’s policy to distribute all of its available cash to maximize its shareholders’ returns after allowing for reasonable reserves makes it a lucrative income stock. Thanks to the economic reopening, the company’s sales have improved significantly, allowing it to return solid cash to its investors. 

Since April 2020, the company has raised dividend seven times. Currently, it offers a monthly dividend of $0.075, translating into a yield of over 6%. 

NorthWest Healthcare Properties REIT

NorthWest Healthcare (TSX:NWH.UN) is another attractive investment to earn a regular monthly income. The company owns a defensive and geographically diversified portfolio focused on healthcare real estate infrastructure that supports its cash flows and payouts. 

NorthWest Healthcare’s solid tenant base supported by government funding, long-weighted average lease expiry term (about 14 years), and high occupancy rate of nearly 97% adds stability and visibility to its cash flows and payouts. Furthermore, most of NorthWest’s rents have protection against inflation, which drives organic growth. 

Its stock price has witnessed a pullback, driving yields higher. It pays a monthly dividend of $0.067 a share, translating into a high yield of over 10%. 

Bottom line

These stocks offer monthly payouts and a high yield, making them solid investments to earn monthly cash. Notably, the TFSA contribution room for 2023 is $6,500, bringing the cumulative limit to $88,000. However, the table below shows that an investment of approximately 25K in each of these stocks could help you make approximately $500 in passive income every month.