The Tax-Free Savings Account (TFSA) will turn 15 years old in January 2024. Since its inception, the TFSA has seen its cumulative contribution room grow from a modest $5,000 to $88,000 this year. That is a fantastic baseline to generate capital growth. However, the TFSA can also be a phenomenal vehicle for the generation of passive income.
Today, I want to discuss how you can seek to earn over $600 every month by targeting some of the top income-yielding equities on the TSX. Better yet, that passive income will be entirely tax free. For this hypothetical, we are going to be utilizing the entirety of our $88,000 contribution room. Let’s dive in.
Here’s the first stock I’d target to build our passive-income portfolio
Extendicare (TSX: EXE) is a Markham-based company that provides care and services for seniors across Canada. This is the first monthly dividend stock I’d look to snatch up to start our passive-income portfolio in the summer. Shares of Extendicare jumped 6.9% month over month as of close on Tuesday, July 25. The stock is up 12% so far in 2023.
Beyond its strong income offering, Canadian investors should be attracted to the potential of long-term-care (LTC) and retirement services, as the country faces an aging population. Extendicare closed at $7.36 per share on July 25. For our hypothetical, we can snatch up 3,900 shares of Extendicare for a purchase price of $28,704. This stock offers a monthly distribution of $0.04 per share. That represents a tasty 6.5% yield.
This investment will allow us to generate a monthly passive income of $156 in our TFSA.
This REIT can deliver huge monthly dividends for our TFSA
Northwest Healthcare REIT (TSX:NWH.UN) is the second stock I want to target to continue to build our TFSA passive-income portfolio. This real estate investment trust (REIT) owns and operates a global portfolio of high-quality healthcare real estate. Its shares have jumped 11% over the past month. The REIT is still down significantly in the year-over-year period.
In the first quarter (Q1) of fiscal 2023, Northwest Healthcare REIT posted revenue growth of 6.2% to $324 million. Meanwhile, adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) increased $10.8 million year over year to $31.0 million. This REIT closed at $7.10 per share on July 25.
For our passive-income scenario, we can snag 4,200 shares of this REIT for a total price of $29,820. This stock currently offers a monthly distribution of $0.067 per share, which represents a monster 11% yield. The purchase of Northwest Healthcare REIT means we can now generate tax-free monthly passive income of $281.40.
One more top dividend stock I’d stash in our TFSA for passive income
Freehold Royalties (TSX: FRU) is the third and final stock I’d look to snag for our passive-income-focused TFSA. This Calgary-based company is engaged in acquiring and managing royalty interest in crude oil, natural gas, natural gas liquids, and potash properties in Western Canada and the United States. Shares of Freehold Royalties have dropped 4.9% in the year-to-date period.
This energy stock closed at $14.34 on Tuesday, July 25. For our final purchase, we can snag 2,055 shares of Freehold Royalties for a total price of $29,468.70. The stock offers a monthly distribution of $0.09 per share, representing a 7.5% yield. That means we can now generate a monthly passive income of $184.95 in our TFSA.
Conclusion
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY |
| EXE | $7.36 | 3,900 | $0.04 | $156 | Monthly |
| NWH.UN | $7.10 | 4,200 | $0.067 | $281.40 | Monthly |
| FRU | $14.34 | 2,055 | $0.09 | $184.95 | Monthly |
These investments will allow us to make tax-free passive income of $622 every month. Annually, that works out to a passive income of $7,464.
