The TFSA (Tax-Free Savings Account) is a great place to buy and hold stock investments for passive income. Normally, in a non-registered account, you would be required to pay tax on all dividend/distribution income that you earn. That can actually reduce the amount of annual income that you earn by as much as 10-20% (depending on your tax bracket).
When dividend stocks are placed in a TFSA, you have zero tax liability. As a result, you can collect all your dividends and re-invest them into further dividend-paying investments. It’s a wonderful way to compound your passive income.
If you have $15,000 to invest in TFSA portfolio, here are three stocks that could collectively earn you as much $850 per year in passive income.
A turnaround story for your TFSA
It has been a rough year for TELUS (TSX: T) stock. It is down 8.5% this year. However, that also means that it is trading with a very attractive 6.3% dividend yield. In fact, TELUS stock has not traded with such an elevated dividend yield in more than a decade.
While 2023 has been a tough year on several fronts, there are reasons to look up for 2024. Firstly, interest rates are expected to come down, and that could alleviate TELUS’s elevated interest expense. Secondly, TELUS made some drastic cuts late in the year. This could help margins recover to a more normal state in 2024.
Lastly, TELUS’s elevated capital plan is nearing completion. It expects a windfall of cash to right-size its payout ratio and lead to about 7% annual dividend growth ahead. If you put $5,000 to work in this TFSA stock, you could earn $78.75 of passive income per quarter, or $315 on an annual basis.
Attractive dividend while you wait for growth
Pembina Pipeline (TSX: PPL) is another passive-income stock for your TFSA. It yields a substantial 6% dividend. Pembina is an energy infrastructure leader in Western Canada.
While the company hasn’t grown much in the past few years, it is on the precipice of some good things. Pembina has worked hard to reduce debt, buy back stock, and improve its capital structure. Today, it expects to entirely fund its capital program with internally generated cash flows.
Given its strong balance sheet, it is well positioned to make acquisitions or invest in some larger growth projects (like LNG export terminals). While you wait for this to happen, the dividend is attractive and has been growing modestly. If you invested $5,000 of TFSA cash in Pembina stock, you could earn $74.09 quarterly, or $296.37 annually.
Top real estate for monthly TFSA passive income
Dream Industrial REIT (TSX: DIR.UN) is another good TFSA stock for passive income investors. It operates a strong portfolio of industrial properties across Canada and Europe. Industrial has been one of the most resilient real estate asset classes.
Dream’s properties are very well located. Most of its leases are trading at below market prices, meaning there is considerable long-term upside in its rents and cash flows.
With interest rates stabilizing and set to decline, real estate investment trusts (REITs) like Dream could see considerable upside. This REIT has a solid balance sheet, so it could also have opportunities to deploy into growth ahead. Right now, the stock yields 5.1%, which is attractive compensation while you wait.
A $5,000 TFSA investment in Dream would earn $21.12 monthly, or $253.40 annually.
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY |
| TELUS Corp. | $23.75 | 210 | $0.375 | $78.75 | Quarterly |
| Pembina Pipeline | $44.86 | 111 | $0.6675 | $74.09 | Quarterly |
| Dream Industrial REIT | $13.78 | 362 | $0.0583 | $21.12 | Monthly |
