The Tax-Free Savings Account (TFSA) was launched by the Canadian federal government back in January 2009. This registered account quickly gained popularity among domestic investors. Indeed, it is now more popular than the much longer-standing Registered Retirement Savings Plan (RRSP). The TFSA has typically garnered attention for the potential it holds for growth-oriented investors. While the story of the TFSA millionaire is always compelling, you should not discount the potential for this account to generate big tax-free passive income.
Today, I want to explore how you can look to earn a whopping five figures in annual passive income in your TFSA. However, we are going to have to utilize all $88,000 in TFSA room to do it. Let’s jump in!
Here’s the first stock I’d target for our passive income TFSA today
True North REIT (TSX: TNT.UN) is a real estate investment trust (REIT) that is primarily focused on investment in and ownership of quality commercial properties across Canada. Shares of True North REIT rose nearly 1% on Wednesday, August 23. However, this stock has seen its value more than halved in the year-over-year period. Investors who want to see more of its recent performance can play with the interactive price chart below.
In the second quarter (Q2) of fiscal 2023, True North REIT reported strong portfolio occupancy of 93%. However, it did report a dip in revenue and earnings, which spurred a reduction in its dividend payout.
This REIT closed at $2.52 per share on Wednesday, August 23. For our hypothetical, we can snatch up 12,580 shares of True North REIT for a purchase price of $31,701.60. The REIT currently offers a monthly distribution of $0.025 per share. That represents a monster 11% yield. This investment will allow us to generate tax-free passive income of $314.50 every month.
This undervalued REIT offers huge income for your TFSA right now
Northwest Healthcare REIT (TSX:NWH.UN) is a REIT that owns and operates a global portfolio of high-quality healthcare real estate. Its shares jumped 2.84% in yesterday’s trading session.
This REIT closed at $6.50 per share on Wednesday, August 23. Canadian investors can purchase 4,888 shares of Northwest Healthcare REIT for a total price of $31,772. Meanwhile, this REIT currently offers a monthly distribution of $0.067 per share, which represents a superb 12% yield. That means we can now churn out monthly passive income of $327.49 in our TFSA.
One more high-yield REIT to complete our passive-income portfolio
Travel demand has picked up nicely in the many months following the lifting of pandemic restrictions. That should pique investor interest in American Hotel Income Properties REIT (TSX: HOT.UN), a Vancouver-based REIT that invests in hotel real estate properties across the United States. Shares of this REIT have suffered a more moderate dip in the year-over-year period.
Shares of this REIT closed at $2.27 per share on August 23. For our final hypothetical purchase, we can snag 10,800 shares of American Hotel REIT for a price of $24,516. The REIT offers a monthly distribution of $0.025 per share, representing a fantastic 10% yield. We can now generate monthly passive income of $270 every month in our TFSA.
Bottom line
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY |
| TNT.UN | $2.52 | 12,580 | $0.025 | $314.50 | Monthly |
| NWH.UN | $6.50 | 4,888 | $0.067 | $327.49 | Monthly |
| HOT.UN | $2.27 | 10,800 | $0.025 | $270 | Monthly |
The investments in these high-yield Canadian REITs will allow us to generate monthly passive income of $911.99 in our TFSA. That works out to an annual passive-income payout of $10,943.88. Best of all, that payout would be entirely tax free!
