How to Use Your TFSA to Earn Over $8,000 Every Year

Canadians can stash stocks like Timbercreek Financial Corp. (TSX:TF) in their TFSA to generate big annual passive income.

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Last year, the Canadian federal government announced that the annual contribution limit to the Tax-Free Savings Account (TFSA) would rise to $6,500. That brought the cumulative contribution total to $88,000, at least for Canadians who have been eligible to contribute since its January 2009 inception date.

The TFSA is the most popular registered account among Canadians, likely due to its flexibility and the overwhelming benefits of tax-free capital growth. However, some forget that you can also churn out tax-free passive-income growth in this account.

Today, I want to explore how you can use your TFSA to earn over $8,000 every year, TAX FREE! Let’s jump in.

Here’s the first REIT I’d target to build our passive-income TFSA

Allied Properties REIT (TSX:AP.UN) is the first stock I want to target for our passive-income-oriented TFSA. This real estate investment trust (REIT) is a leading owner-operator of distinctive urban workspaces in major Canadian cities. Shares of this REIT dropped 1.84% on Friday, July 28. The stock has fallen sharply in the year-over-year period, shedding over $10 in overall value.

In the second quarter (Q2) of fiscal 2023, this REIT reported year-over-year rental revenue growth of 4.1% to $136 million. Meanwhile, net income and comprehensive income increased 26% to $126 million. EBITDA stands for earnings before interest, taxes, depreciation, and amortization, and it aims to give a clearer picture of a company’s profitability. Allied Properties REIT delivered adjusted EBITDA growth of 5.2% to $106 million.

This REIT closed at $21.25 on Friday, July 28. For our hypothetical, we can snatch up 1,350 shares of the REIT in our TFSA for a purchase price of $28,687.50. The REIT offers a monthly dividend of $0.15 per share. That represents a beefy 8.4% yield. We can now generate monthly passive income of $202.50 in our TFSA.

You can trust this monthly dividend stock for big monthly income forever

Timbercreek Financial (TSX:TF) is a Toronto-based mortgage investment company that provides shorter-duration structured financing solutions to commercial real estate investors in Canada. Its shares have jumped 2% month over month as of close on July 28. The stock is up 4.2% so far in 2023.

Shares of Timbercreek closed at $7.60 on July 28. We can purchase 3,800 shares of Timbercreek in our TFSA for a total price of $28,880. This stock last paid out a monthly distribution of $0.058 per share, which represents a superb 9% yield. The purchase means we can now earn tax-free monthly passive income of $220.40 going forward.

One more REIT I’d snatch up for our passive-income TFSA

Northwest Healthcare REIT (TSX:NWH.UN) is the third monthly dividend stock I’d target for our passive-income portfolio. This Toronto-based REIT owns and operates a global portfolio of high-quality healthcare real estate. Shares of Northwest have jumped 16% over the past month. The REIT is still down sharply in the year-over-year period.

This REIT closed at $7.11 on Friday, July 28. For our final purchase, we can snatch up 4,275 shares of Northwest Healthcare REIT for a total price of $30,395.25. This REIT offers up a monthly dividend of $0.067 per share, representing a monster 11% yield. That means we can now make a monthly passive income of $286.42 in our TFSA.

Bottom line

COMPANYRECENT PRICENUMBER OF SHARESDIVIDENDTOTAL PAYOUTFREQUENCY
AP.UN$21.251,350$0.15$202.50Monthly
TF$7.603,800$0.058$220.40Monthly
NWH.UN$7.114,275$0.067$286.42Monthly

These investments will enable us to generate a monthly passive income of $709.32 in our TFSA. That works out to an annual tax-free passive income payout of $8,511.84. This is a nice chunk of tax-free income to gobble up every year!

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 NorthWest Healthcare Properties Real Estate Investment Trust. The Motley Fool has a disclosure policy.

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