TFSA Investors: 2 High-Yield Stocks to Earn $42/Month

The Bank of Canada accelerated its rate hike from March 2022, increasing the interest rate from 0.5% to 5% in 16 months. These efforts helped it significantly reduce inflation. Even though inflation is still higher (2.8%) than its target rate of 2%, the central banker could reduce inflation by sustaining the 5% rate for some time. The current market has pulled down prices of some dividend stocks as high-interest rates stress their margins. Now is a good time to lock in a high yield of 9-11% and accelerate your passive income. 

Two high-yield stocks for TFSA investors 

Remember, the high-yield stock has a risk of a dividend cut or takeover. This month, high-yield dividend stock TransAlta Renewables announced an acquistion by its parent. TransAlta. This acquisition comes as maintaining two separate companies is becoming expensive in the current environment. I preferred TransAlta Renewables stock for its 7%-plus yield, but now this advantage will be gone after the acquisition. 

In such cases, sell your TransAlta Renewables shares and move onto the next high-yield stock. Here are two high-yield stocks that are still a good investment for your Tax-Free Savings Account (TFSA). And the best part is they give monthly distributions, so you don’t have to wait for three months. 

True North Commercial REIT 

When it comes to monthly payouts, real estate is the best. REITs pass on their monthly rents as distributions. But these payouts are taxable in the hands of the shareholders. Thus, the TFSA is the best tool to invest in them as all investment income in this account is tax-exempt. 

The high-interest rate has dried up liquidity in the market and made mortgages unaffordable for everyone. In the United States, commercial property debt dropped for the first time in two years, hinting at the risk of higher delinquencies. But Canadian commercial real estate is relatively strong. 

True North Commercial REIT (TSX: TNT.UN) halved its distributions in March as its occupancy ratio dropped. The distribution cut will give it some flexibility to continue paying its mortgage. Investors have already priced in the distribution cut, as the REIT stock is trading 57% below its trading price. 

As the stock price fell more than the distribution, its annual yield surged to 11%. So you can get True North Commercial REIT’s $0.025 monthly payout per share for $2.69. If the interest rate falls next year, the commercial property market could improve and drive the REIT’s stock price. But if the high-interest rate triggers a recession, the REIT’s occupancy could fall further. However, the REIT can sustain a recession as 80% of its tenants are governments and companies with high credit rankings. They might not vacate the property during a recession. 

Timbercreek Financial stock

As I discussed earlier, commercial REITs are having difficulty keeping up with their mortgages. But the mortgage lender is enjoying peak margins. Timbercreek Financial (TSX: TF) gives short-term loans and mortgages to commercial properties. The lender is enjoying high net interest margins, which could take a hit when interest rates start falling. But that could lead to more loan volumes and higher processing fees. 

However, the major risk for Timbercreek is delinquency. If the delinquency rate increases, the commercial mortgage lender could see a dip in share price. Until then, you can get Timbercreek’s $0.058 monthly payout for $7.60 per share. 

How to earn $42/month 

The above two high-yield stocks carry risk. But if the markets improve, you can lock in a high yield for a long time. If you invest $2,500 each, the two stocks can give you almost $42/month in passive income. Below is the calculation. 

Assuming the two companies sustain their dividends, your $5,000 investment today could lock in a 10% average yield and earn you $502.92 a year. It’s a good source of short-term passive income.