If you want to earn some extra investment passive income, the TFSA (Tax Free Savings Account) is a great place to hold your investments. All income (interest, dividends, and capital gains) earned in the TFSA is tax-free.
The TFSA is the place to compound wealth
The TFSA is a great account if you want to keep your income and re-invest it. Over time, your passive income can be re-invested to generate more income. By paying no tax, you only accelerate the power of compounding over time.
Say you have a hypothetical $45,000 to invest. Here is a mini three-stock portfolio that exemplifies the level of dividend yields you can earn in the Canadian market today.
At the Motley Fool, we recommend a more diversified portfolio. However, this just demonstrates how you can earn an average of about $220 per share of dividends from some well-known Canadian dividend stocks.
A real estate stock for monthly income
Dream Industrial Real Estate Investment Trust (TSX: DIR.UN) owns one of the largest portfolios of multi-tenanted industrial properties in Canada. However, it also has substantial property square footage in Europe and the United States.
Dream has been delivering very solid high single-digit funds from operation (FFO) per unit growth since the pandemic. Industrial property has been one of the strongest segments in real estate.
Dream’s properties happen to be in some of the top jurisdictions for industrial real estate demand. That has been very favourable for occupancy and rent growth.
The company has a solid, low-levered balance sheet. Likewise, its distribution payout sits safely in the 70% range. Today, Dream Industrial stock yields 5.15%. Put $15,000 into this stock, and you would earn $64.05 of passive income monthly in your TFSA.
An energy infrastructure stock with a steady yield
If you are just looking for passive income in your TFSA, Pembina Pipeline (TSX: PPL) is a decent stock. Pembina is one of Western Canada’s largest energy infrastructure players. The company is not growing fast, but it has a very steady business.
Over 85% of its income comes from its contracted pipeline and midstream assets. When energy prices increase, it gets to make an increased spread on its energy marketing business. Its largest exposure is to natural gas, which has not been rising as much as oil.
However, natural gas does have a long-term future as a significant energy transition fuel. That could be favourable for Pembina over the long term. Unlike other peers, it has a very good balance sheet that is not over-levered.
Pembina stock earns a 6.4% dividend yield. Invest $15,000 in Pembina, and you’d earn $238.97 quarterly, or $79.66 if you averaged it monthly.
Risky, but this telecom could pay off for a TFSA investor
It is not often that you can buy TELUS (TSX: T) stock with a yield over 6%. Today, that opportunity is available. In its recent quarter, TELUS ran into some operational and financial weakness. Debt is getting a bit high, there are worries about its non-telecom growth verticals, and the company had to lay off 6,000 staff.
However, the market does not yet appreciate the savings the efficiency measures will create. Likewise, TELUS is expected to significantly pull back its capital spending and yield significant spare cash in 2024.
If you used $15,000 of TFSA cash to buy TELUS stock, you would earn $237.80 quarterly or $79.27 averaged monthly. TELUS could be a good play for a high yield if you can look past the current malaise.
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY |
| Dream Industrial REIT | 13.65 | 1,098 | $0.05833 | $64.05 | Monthly |
| Pembina Pipeline | 41.79 | 358 | $0.6675 | $238.97 | Quarterly |
| TELUS Corp. | 22.84 | 656 | $0.3625 | $237.80 | Quarterly |
