Passive Income: How To Make $130 Per Month Tax-Free

With inflation eating into consumers’ pockets, having a secondary or passive income would greatly help. Investing in high-yielding dividend stocks would be one of the convenient ways to earn a passive income. Also, the returns would be tax-free if you make these investments through your TFSA (tax-free savings account).

For this year, the CRA (Canadian Revenue Agency) has fixed the contribution room at  $6,500, while the cumulative value since 2009 stands at $88,000. So, let’s assume you have the room to invest around $18,500. If you invest that amount equally among the following three Canadian stocks, you can earn a passive income of more than $130 every month. Let’s look at these companies in detail.

Northwest Healthcare Properties REIT

Northwest Healthcare Properties REIT (TSX:NWH) owns and operates 231 healthcare properties across eight countries, with a total leasable area of 18.5 million square feet. Supported by its defensive portfolio, long-term lease agreements, and government-backed tenants, the company enjoys a higher occupancy rate irrespective of the economic outlook. Also, around 83% of its rent is indexed to inflation, thus shielding against rising prices.

However, amid a temporary increase in leverage and rising interest rates, the healthcare REIT has posted weak quarterly performance over the last two quarters, dragging its stock price and valuation down. Meanwhile, the company has opted to sell its non-core assets and lower its stake in several joint ventures, which could allow it to reduce its debt levels. So, given its defensive portfolio and initiatives to improve its financial position, I believe Northwest Healthcare’s dividends are safe. It currently pays a monthly dividend of $0.06667/share, with its forward yield at 11.95%.

Pizza Pizza Royalty

Another high-yielding dividend stock to have in your portfolio would be Pizza Pizza Royalty (TSX: PZA). The pizza chain operates Pizza Pizza and Pizza 73 brand restaurants through its franchisees. Due to its highly franchised business model, the company’s financials are unaffected by rising prices and wage inflation. So, it generates stable cash flows, allowing it to raise its monthly dividends seven times since April 2020. With a monthly dividend of $0.075/share, it offers a forward yield of 6.41%.

Besides, the restaurant company has accelerated the expansion of its restaurant network while expecting to increase its restaurant count by 3–4% this year. Also, its restaurant renovation program, menu innovations, value messaging, and promotional activities could boost its same-store sales, thus driving its royalty income. So, I believe PZA’s future payouts are safe.

Extendicare

My final pick would be Extendicare (TSX: EXE), which provides care and services to Canadians. The company reported a healthy second-quarter performance last month, with the occupancy rate of its LTC (long-term care) segment increasing by 60 basis points. Also, the average daily volume of its home health care increased by 4.1%.

Alongside the improvement in its operating metrics, its revenue increased by 3.7% to $307.5 million. Meanwhile, its NOI (net operating income) declined by $1.9 million to $28.5 million. However, removing one-time expenses, its NOI increased by $1.6 million amid higher home healthcare volumes and favourable rate revisions.

Notably, the demand for care and services could increase alongside the growing aging population, thus expanding the addressable market for Extendicare. Also, it is building a 256-bed LTC home in Peterborough, Ontario, to replace the existing 172-bed home. Besides, the company last month completed the previously announced transaction with Revera, acquiring 56 LTC homes and around 7,000 beds. These initiatives could boost its financials, thus making its future payouts safer. Meanwhile, Extendicare currently pays a monthly dividend of $0.04/share, thus offering an attractive forward yield of 7.63%.