Passive Income: How to Make $195/Month TAX FREE!

Canadians can make passive income in their TFSA with the help of dividend stocks like TransAlta Renewables Inc. (TSX:RNW).

| More on:
top TSX stocks to buy

Source: Getty Images

Statistics Canada recently revealed that domestic inflation fell to 3.4% in the month of May. That was down from the 4.4% inflation rate reported in the month of April 2023. This represents the lowest inflation rate in two years. Despite this report, the Bank of Canada (BoC) is expected to push forward with yet another interest rate hike as soon as July.

Today, I want to explore a passive-income strategy, as Canadians continue to be squeezed. In this scenario, we are going to be using $30,000 in our Tax-Free Savings Account (TFSA) to build a passive-income portfolio. Let’s dive in.

This energy stock is one of the best passive-income vehicles for investors

Freehold Royalties (TSX:FRU) is a Calgary-based company that is engaged in acquiring and managing royalty interest in the crude oil, natural gas, natural gas liquids, and potash properties in Western Canada and the United States. Shares of this energy stock have dropped 10% month over month as of close on Tuesday, June 27. Freehold stock has now plunged 11% in 2023.

In the first quarter of fiscal 2023, Freehold Royalties reported a 13% decline in royalty and other revenue to $76.6 million. Meanwhile, it posted total production growth of 8% to 14,724 barrels of oil equivalent per day (boe/d). Freehold reported funds from operations per diluted share of $0.39.

Shares of this energy stock closed at $13.28 on Tuesday, June 27. For our hypothetical, we can grab 750 shares of Freehold Royalties for a purchase price of $9,960. This stock offers a monthly distribution of $0.09 per share. That represents a super 8.1% yield. Our purchase will allow us to generate monthly passive income of $67.50 in our TFSA.

Why Extendicare is a great target for your TFSA today

Extendicare (TSX:EXE) is a Markham-based company that provides care and services for seniors in Canada. This stock has dropped 2.1% month-over-month at the time of this writing. Its shares have climbed 6.5% so far in 2023.

This company released its first-quarter (Q1) fiscal 2023 earnings on May 4. Extendicare posted adjusted earnings before interest, taxes, depreciation, and amortization of $31.0 million — up $10.8 million compared to Q1 of fiscal 2022. Meanwhile, it saw home healthcare volume growth reach an average daily volume of 26,043. That was up 6.1% compared to Q1 FY2022.

Extendicare stock closed at $6.96 per share on Tuesday, June 27. For our scenario, we can buy 1,400 shares for a total price of $9,744. This stock last paid out a monthly dividend of $0.04 per share, which represents a very tasty 6.9% yield. Our purchase will let us churn out tax-free monthly passive income of $56 going forward.

One more dividend stock that can round out our passive-income portfolio

TransAlta Renewables (TSX:RNW) is the third and final monthly dividend stock I’d target for our passive-income-oriented TFSA today. This Calgary-based company owns, develops, and operates renewable and natural gas power-generation facilities and other infrastructure assets in Canada, the United States, and Australia. Shares of TransAlta have dropped 2.3% so far in 2023.

Shares of this dividend stock closed at $11.10 on Tuesday, June 27. We can snatch up 927 shares of TransAlta for a purchase price of $10,289.70. This stock offers a monthly dividend of $0.078 per share, representing a fantastic 8.4% yield. We can now generate monthly passive income of $72.30 in our TFSA.



These stock purchases in our TFSA will allow us to generate monthly passive income of $195.80 completely tax free. That works out to annual passive income of $2,349.60.

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. The Motley Fool has a disclosure policy.

More on Dividend Stocks

oil and gas pipeline
Dividend Stocks

Is Enbridge Stock a Buy for its 7.6% Dividend Yield?

Enbridge stock is a TSX giant that offers investors a tasty dividend yield of 7.6%. Is this high-dividend stock a…

Read more »

Early retirement handwritten in a note
Dividend Stocks

Retire Early With These 3 Canadian Passive-Income Stocks

Three Canadian passive-income stocks are smart choices for people with early retirement goals.

Read more »

Dividend Stocks

3 Dividend Deals You Won’t Want to Miss

Given their solid underlying businesses and stable cash flows, I believe three dividends stocks would be an excellent addition to…

Read more »

A worker gives a business presentation.
Dividend Stocks

For 6% Yields, Buy These 3 TSX Stocks Now

Companies like Enbridge offer high yields and are focused on elevating their shareholders’ value by bolstering dividend distributions.

Read more »

protect, safe, trust
Dividend Stocks

How to Invest $10,000 Today for Decades of Safe Passive Income

Want to earn safe and predictable passive income? Here are some ideas on how to invest $10,000 and earn +$400…

Read more »

protect, safe, trust
Dividend Stocks

Turn $15,000 Into Your Financial Safety Net

You can turn limited capital into a financial safety net by purchasing a high-yield stock paying monthly dividends.

Read more »

Dividend Stocks

Brookfield Stock: It’s Time to Buy the Dip

Brookfield (TSX:BN) stock is getting cheap. The time has come to buy the dip!

Read more »

Dividend Stocks

How to Earn $14,000 Per Year in Tax-Free Income and Maximize Your CPP Payout

The difference between the maximum and average CPP payout is $1,094/month. To collect the maximum CPP, you need an alternate…

Read more »