How You Can Make $1,000 in Annual Tax-Free Dividends With Less Than $20K

You can leverage the benefits of the TFSA (Tax-Free Savings Account) and create a steady stream of tax-free passive income for life. The TFSA is a registered account in Canada that can be used to hold a variety of qualified investments such as bonds, stocks, mutual funds, Guaranteed Investment Certificates, and exchange-traded funds.

Any income earned from these investments in the form of dividends, interests, and capital gains are exempt from Canada Revenue Agency taxes. So, the TFSA is ideal for those who want to hold dividend growth stocks and earn returns in the form of regular dividends as well as capital gains.

Here are three dividend-paying blue-chip TSX stocks you can consider buying in your TFSA.

Enbridge stock

Among the most popular dividend stocks in Canada, Enbridge (TSX:ENB) currently offers you a tasty yield of 7.7%. Enbridge is a well-diversified energy infrastructure company with multiple cash flow-generating assets.

A majority of its cash flows are tied to long-term contracts and indexed to inflation, shielding the company from macro headwinds such as fluctuations in commodity prices and rising costs. Its steady stream of cash flows has allowed Enbridge to increase dividends by 10% annually in the last 28 years, which is exceptional for a company part of the energy sector.

Priced at less than 16 times forward earnings, ENB stock is quite cheap and trades at a discount of 20% to consensus price target estimates.

Bank of Nova Scotia stock

Another TSX giant, the Bank of Nova Scotia (TSX:BNS) offers shareholders a dividend yield of $4.24 per share, indicating a yield of more than 7%. Similar to the energy sector, the banking sector is also cyclical. But the robust liquidity positions of the big Canadian bank, as well as its strong market shares and conservative approach, make BNS stock a top investment choice right now.

BNS stock is down 38% from all-time highs as investors are worried about a sluggish macro environment and higher delinquency rates, which might negatively impact the future earnings for the financial heavyweight.

However, BNS has successfully navigated multiple downturns in the past and has maintained its dividend payout for several decades. Moreover, these dividend payouts have risen by almost 10% annually in the last 25 years.

Priced at 8.4 times forward earnings, BNS stock trades at a discount of 18% to consensus price target estimates.

goeasy stock

The final TSX stock on my list is goeasy (TSX:GSY), which is valued at $1.93 billion by market cap. goeasy is also part of the financial lending sector, and the stock trades 46% below record highs.

GSY stock is priced at 8.6 times forward earnings, which is very cheap, given Bay Street forecast adjusted earnings to increase by 12% annually in the next five years.

The dividend yield for goeasy stock is just 3.3%. However, it has increased payouts by more than 15% annually in the last 20 years.

The Foolish takeaway

You need to invest a minimum of $16,667 distributed equally in these three TSX dividend stocks to earn at least $1,000 in annual dividend income. Your dividends can double in the next decade if companies increase these payouts by 7% annually.