Retire Early: How to Earn $300 Per Month From Your TFSA

Runaway inflation and aggressive rate hikes by the Bank of Canada to bring it down derailed the retirement plans of many Canadians. But with inflation dropping to its lowest level in two years (2.8% in June 2023), people can get back on track, including those with early retirement dreams.

Maximizing your Tax-Free Savings Account (TFSA) to build retirement wealth can boost your chances of retiring early, before the standard retirement age of 65. Most TFSA investors go dividend investing to take advantage of the power of compounding.

However, investing in stocks that pay monthly dividends for faster compounding of TFSA balances is a more brilliant move. The top picks are Whitecap Resources (TSX: WCP) and Nexus Industrial (TSX: NXR.UN). Besides the attractive dividend yields, the stock prices are less than $11 per share. You can accumulate more shares and reinvest them 12 times a year instead of four.

Earn $300 monthly

Whitecap Resources trades at $10.11 per share and pays a juicy 5.73% dividend. On the other hand, Nexus’ dividend offer is a mouth-watering 7.57% ($8.42 per share). Given the stock prices and yields, you would need 3,105 Whitecap and 2,845 shares of Nexus for each to produce $150 monthly.

However, because of the TFSA annual contribution limits, you can’t over-contribute. It would take approximately eight-and-a-half to nine years to earn $300 per month from your TFSA with the two dividend stocks. The assumption is that the annual limit stays constant at $6,500, and you will contribute the maximum yearly (equal allocation to WCP and NXR.UN).

Strong focus on shareholder returns

Whitecap Resources’ competitive advantages are its low-decline light oil asset base and core areas of operations (North and Central Alberta and Saskatchewan). The $6.1 billion oil-weighted oil company has growth and cash-generation engines.

Moreover, its risk management program reduces revenue volatility and allows funding of capital expenditures and sustenance of monthly cash dividends to shareholders.

The investment takeaways for this energy stock are stable fundamentals and an asset base with excellent earnings potential. Whitecap’s earnings have been strong since the oil slump in 2020. Also, the production volume is growing at a healthy rate and should accelerate if normalcy returns to the industry soon.

Growth-oriented REIT

Nexus Industrial’s appeal is its focus on in-demand industrial real estate. The industrial portfolio of this $760.7 million growth-oriented real estate investment trust (REIT) accounts for 85% of net operating income (NOI). Besides the stable cash flows from long-term leases, the lease contracts have rent escalation clauses.

The weighted average lease term of the industrial properties is 6.6 years, while the occupancy rate is 99%. Management’s ultimate goal is to transform Nexus into Canada’s pure-play industrial REIT. Thus far, the objective is realizable.

The industrial portfolio continues to perform well in 2023 due to limited vacancy and supply shortages . Furthermore, the ever-increasing demand for warehouse and logistics space drives rental prices higher. Nexus is selling or disposing of some of its office and retail properties.

Retirement dreams are alive

Early retirement dreams of some Canadians remain alive with the sharp decline in headline inflation and a powerful ally in the TFSA. You can stay the course and reinvest the dividends until you earn $300 in tax-free income monthly.