TFSA Passive Income: Earn $440/Month!

Did you know that you can earn up to $440 per month tax free in a fully maxed-out Tax-Free Savings Account (TFSA)?

It’s true!

Provided that you were at least 18 in 2009 and can achieve a $88,000 balance within a reasonable timeframe, it is indeed possible to earn $440 per month in dividends. That’s how much you get if you invest $88,000 at a 6% yield, and the dividends are paid out monthly.

Technically, you can get even more than $440 per month in your TFSA. If your portfolio yields 8%, you can get $586.66 per month, and if you’ve realized gains in your TFSA, then you can get much higher amounts than that by reinvesting the gains you’ve made. However, ultra-high yields tend to be risky, and we can’t just assume that everybody is sitting on large TFSA gains.

So, in this article, I’ll explore how you can get to $440 per month in a passive TFSA income with a relatively modest 6% yield assumed.

Method #1: GICs

The safest way to get to $440 per month in passive TFSA income is to invest in Guaranteed Investment Certificates (GICs). Currently, GIC yields max out at about 5.5%, but they could reach 6% if the Bank of Canada keeps hiking interest rates.

If you buy a $88,000 one-year GIC that yields 6%, you’ll get a $5,280 gain at the end. That works out to $440 per month in passive income. This technically isn’t “monthly” passive income but annual income averaged out on a monthly basis. You could achieve exactly $440 per month in passive income next year by investing $7,333 per month into GICs and waiting for them to mature in the year ahead.

Method #2: Stocks

Another way you can achieve $440 per month in passive TFSA income is by investing in stocks. It’s not hard to find stocks that yield 6%, and some of them pay monthly.

Consider First National Financial (TSX:FN). First National is a non-bank mortgage lender that helps people borrow at competitive rates. It has a 6% dividend yield, and its dividend is paid out on a monthly schedule. So, the math we worked out at the start of this article happens to fit FN stock.

Of course, FN, like any other dividend stock, could have its dividend cut. Is it at risk of having that happen?

Based on First National’s most recent earnings release, the answer to that question would appear to be “no.” In its most recent quarter, FN delivered the following:

• $137.8 billion in mortgages under management, up 8%
• $526 million in revenue, up 26%
• $89.2 million in net income, up 59.5%
• $1.47 in earnings per share

Overall, it was a pretty good showing. With FN paying out $0.20 in monthly dividends, the payout is well covered by the company’s earnings, and with earnings going up, there’s even room for it to grow. On the whole, you could do much worse than holding First National Financial in your TFSA today.