TFSA Passive Income: Earn $200/Month

These three monthly-paying dividend stocks are a must for your TFSA in this inflationary environment.

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Canada’s inflation in September was at 3.8%, a decline of 0.2% from the previous month and lower than analysts’ expectation of 4%. Despite the de-acceleration, prices of groceries and gasoline were higher year over year, pushing prices higher. With rising prices eating into your pockets, investors can lower the impact by investing in high-yielding monthly dividend stocks to generate a stable passive income.

Meanwhile, investors can make tax-free returns by investing through a TFSA (Tax-Free Savings Account). The Canada Revenue Agency allows investors to earn tax-free returns on a specified investment amount called contribution room. This year’s contribution room is $6,500, with the cumulative value at $88,000. By investing around $13,000 in each of the following three monthly-paying dividend stocks, investors can earn a passive income above $200/month. Now, let’s look at these three stocks in detail.


Pizza Pizza Royalty

Pizza Pizza Royalty (TSX:PZA) is one of the top monthly-paying dividend stocks to have in your portfolio due to its stable cash flows amid a highly franchised business. It collects royalties from its franchisees based on their sales. So, higher inflation is not hurting its margins. Meanwhile, the company has posted solid performances this year, with its royalty income growing by 13% in the first two quarters. A same-store sales growth of 11.4% and the net addition of 16 new restaurants to its royalty pool drove its royalty income. Supported by solid financials, PZA has increased its dividends seven times since April 2020, while its forward yield is at a juicy 6.79%.

Meanwhile, the company is expanding its restaurant network and plans to increase its restaurant count by 3-4% this year. Its continued menu innovations, promotional activities, and restaurant renovation initiatives could continue to drive its same-store sales.

Whitecap Resources

The fear that the escalating Isreal-Palestine conflict could disrupt oil supplies has boosted oil prices. Besides, analysts are projecting oil prices to remain elevated in the near to medium term, thus benefiting oil-producing companies. Given the favourable environment, I have selected Whitecap Resources (TSX:WCP) as my second pick.

Yesterday, the company reported its third-quarter performance, with its total production increasing by 7.7%. However, due to the lower realization price, its top line and net earnings declined by 10.7% and 52.9%, respectively. Meanwhile, its cash flows remained stronger, generating $466 million in fund flows. Also, the company has lowered its net debt to $1.26 billion through solid cash flows. With net debt falling below its target of $1.3 billion, the company expects to return around 75% of its free fund flows to shareholders through dividends and share repurchases.

Besides, WCP continues to strengthen its production capacity through capital investments. Meanwhile, the company’s management projects its overall production to reach $200,000 barrels of oil equivalent per day by 2027, representing an annualized organic growth of 5%. These growth initiatives and higher oil prices could boost the company’s financials in the coming years, thus making its future payout safer. Currently, the company pays a monthly dividend of $0.0608/share, with its forward yield at 6.49%.

Northland Power

My final pick is Northland Power (TSX:NPI), which develops, constructs, and operates power projects across different technologies. It operates various power-producing facilities, with a total power production capacity of 3.2 gigawatts. Meanwhile, the company sells most of the power generated from these facilities through long-term power-purchase agreements, with the weighted average remaining life of these contracts at 14 years. These long-term contracts will stabilize its financials.

Meanwhile, the energy company could also benefit from the increased transition towards renewable energy. It has several projects under construction, which could increase its production capacity to six gigawatts by 2027 at an annualized growth rate of 17%. Given its healthy growth prospects, I expect the company to continue paying dividends at a higher rate. With a monthly dividend of $0.10/share, its forward yield is currently at 5.75%.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Rajiv Nanjapla has no position in any of the stocks mentioned. The Motley Fool recommends Whitecap Resources. The Motley Fool has a disclosure policy.

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