TFSA Investors: Just $5,000 Can Create $1,567 in Passive Income

The Tax-Free Savings Account (TFSA) is one of the best places where Canadians can keep their cash. Not only do you have tax-free income coming your way, you can also take it out at any point without penalties.

What’s more, the TFSA can create passive income you can bring in for life! This can help do everything from pay the bills, to reinvest for more passive income. And you can get started with just $5,000.

Start with what you can afford

The average Canadian has at least some savings put away, say, about $5,000. But you shouldn’t be putting all of that cash towards one stock. Far from it. You should have a diversified set of assets that might include guaranteed income certificates (GIC), bonds, and equities.

Here, however, we’re going to focus on stocks as an example of how you could certainly take a $5,000 investment, if you can afford it, and create a massive amount of passive income.

What’s more, stored in a TFSA all that passive income will be tax-free. No matter how much you gain in returns, dividends or anything, you can take out as much as you want, anytime you want, no taxes added.

A stock to consider

If you’re going to consider stocks for high passive income, then you want ones that are going to keep paying out that dividend income for decades. That’s why it’s ideal to look at Dividend Aristocrats for such an option. And right now, there are plenty that are huge deals.

One to consider is BCE (TSX:BCE). Shares of BCE stock are down because of market conditions, but also thanks to a potential merger between rivals. Because of this, BCE shares are still down by almost 15% as of writing.

Yet over time, this stock has only gone up and up. And so has its dividend. That’s why I would certainly consider it for long-term passive income, and for a steal right now. Today, you can pick up a dividend yield of 7.26%! One that certainly won’t last forever.

Returns and dividends

Now the important thing to note here as well is that passive income comes from two sources in the case of stocks. Sure, there is dividend income. But there are also returns. After all, passive income is any income earned while you’re doing just about anything else.

With that in mind, let’s take into consideration both the returns you could gain from BCE stock, as well as the dividend income. Here is what that could look like today, as well as when shares return to 52-week highs.

As you can see, you’ve created annual passive income through dividends of $363.78. But on top of that, you’ll have earned $1,204 in returns. That’s a total of $1,567.78 in passive income! Income that could be just around the corner.