Generating a passive income from your Tax-Free Savings Account (TFSA) is easy. All you have to do is divert a decent sum from your retirement savings to some dividend stocks. However, developing a passive income that’s a useful part of your current financial life and can contribute towards your retirement nest egg as well will require you to choose the dividend stocks more carefully.
There are three amazing dividend stocks that can be good candidates for developing a passive-income stream that’s healthy, sustainable, and may benefit you for years to come.
A telecom stock
BCE (TSX:BCE) is the leader of the Canadian telecom sector in at least two categories: market value and dividend yield. BCE’s yield is almost always higher than the other two telecom giants in Canada that, along with BCE, control the bulk of the market.
The current yield is even more attractive than usual, thanks to the 30% discount the stock is trading at. This slump has pushed the dividend up to 7.5%. The payout ratio of the company usually remained at a healthy level, but it has been struggling since 2020. Still, the company hasn’t broken its dividend-growth streak and has been growing its payouts consistently for 14 years.
At its current yield, the stock can offer you a yearly income of about $750 a month if you invest $10,000 from your TFSA in this industry leader.
A utility company
Utility companies make good dividend payers in general because of the consistency of their finances, but that business model strength doesn’t take centre stage when it comes to Canadian Utilities (TSX:CU). This dividend stock stands out as the only Dividend King in Canada (for now). It has grown its payouts for about 51 consecutive years, making it the oldest Dividend Aristocrat in Canada.
This rock-solid dividend history endorses Canadian Utility’s ability to sustain and even grow its payouts in a variety of markets. Buying it now makes sense because the stock is quite heavily discounted (25%), and the yield has naturally gone up.
Its current 6% yield can help you generate a reliable annual passive income of about $600 with $10,000 invested in the company.
A bank
Canadian bank stocks are among the most coveted dividend picks in Canada for their financial stability and decent yields.
From a yield perspective, one of the best options available in the banking sector right now is Bank of Nova Scotia (TSX:BNS). Like the other Canadian banks, it’s one of the oldest dividend-paying institutions in the country and has joined the ranks of Aristocrats by growing its payouts for 12 consecutive years.
It’s currently one of the most attractively valued and heavily discounted banks in the country and has lost about a third of its valuation (35%) from its Feb. 2022 peak.
The bank has started seeing some improvement in its finances as well, which may become a trigger for its recovery from the current slump. So, you may consider locking in the current attractive 7% yield and start generating a yearly income of about $700 with $10,000 invested in this bank stock.
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Foolish takeaway
Collectively, the three dividend stocks can help you turn $30,000 of your TFSA savings into a passive-income stream of about $2,050 a year. This income stream is likely to grow over time as all three stocks are Dividend Aristocrats with long histories of dividend growth.
