Generating a passive income is one of the best feelings in the world. By simply putting your money to work, you can keep earning in your sleep. The best thing about earning a passive income is the ability to reinvest your earnings to leverage the power of compounding to accelerate your wealth growth.
If you can create a sizeable passive income stream in a Tax-Free Savings Account (TFSA), the best part about it is being able to enjoy that income without incurring taxes. While you can use the TFSA as an investment tool to hold various types of assets, dividend investing is the most straightforward method to create a passive income stream.
The key to finding reliable investments for this is buying high-quality and high-yielding dividend stocks. If the underlying dividend stocks offer growth potential through capital gains and dividend hikes, it can make your portfolio even more favourable to achieving long-term financial goals.
I will discuss three TSX dividend stocks you can consider for creating such a passive income portfolio with a hypothetical $75,000 in a TFSA.
Acadian Timber
Acadian Timber Corp. (TSX:ADN) is a $304.3 million market capitalization Canadian supplier of frosty products, serving customers across Eastern Canada and the Northeastern US.
The company sells a wide range of wood products to an ever-expanding customer base, including sawlogs of hardwood and softwood, biomass by-products, pulpwood, and several more. Its diverse and constantly-in-demand products make for stable revenues.
Through sustainable forest management, the company maximizes its cash flows. The forestry industry is reputably stable, providing a solid long-term outlook for Acadian Timber. As of this writing, it trades for $17.69 per share, boasting a 6.56% dividend yield.
SmartCentres REIT
SmartCentres REIT (TSX:SRU.UN) is a $3.7 billion market capitalization Real Estate Investment Trust (REIT) boasting over 170 strategically located properties in communities throughout Canada. It is a fully integrated commercial and residential REIT, generating most of its revenue through a high-quality tenant base that includes the likes of Walmart.
Canada has no shortage of Walmart locations. In the current economic climate, the company’s stores provide excellent prices for groceries, necessities, and various goods. With the tenant’s business strong, SmartCentres REIT enjoys terrific occupancy rates and rental income. As of this writing, SmartCentres REIT trades for $25.26 per share, boasting a 7.32% dividend yield.
Bank of Nova Scotia
Bank of Nova Scotia (TSX:BNS) is a $77.2 billion market capitalization giant in the Canadian financial services sector. Headquartered in Toronto, Scotiabank is one of Canada’s Big Six Banks. It has solid domestic operations and an international segment slated to drive stellar growth in the coming years.
Not spared by the broader market uncertainty, Scotiabank stock has seen its share prices decline. While that might be alarming for some, the bank is well-capitalized to navigate the slump and bounce back strong. As of this writing, Scotiabank stock trades for $63.62 per share. Due to its lower share prices, it boasts an inflated 6.66% dividend yield that you can lock into your self-directed TFSA portfolio today.
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Foolish takeaway
After the 2024 update, the cumulative contribution room for a TFSA active since the account’s inception stands at $95,000. Out of that, if you have a hypothetical $75,000 in contribution room available and that much capital to invest in dividend stocks, you would need to average a 6.9% dividend yield to earn $5,200 per year, translating to $100 per week in tax-free dividend income.
If we were to divide the $75,000 across ADN stock, BNS stock, and SRU.UN, here’s what the hypothetical portfolio for generating $100 per week might look like:
| Company | Recent Price | Amount Allocated | Dividend Yield | Annual Payout |
| ADN | $17.69 | $20,000.00 | 6.56% | $1,312.00 |
| SRU.UN | $25.26 | $35,000.00 | 7.32% | $2,562.00 |
| BNS | $63.62 | $20,000.00 | 6.66% | $1,332.00 |
| Total Annual Payout | $5,206.00 | |||
| Total Weekly Payout | $100.11 | |||
