The TFSA (Tax-Free Savings Account) is a great place to invest for passive income. When you earn dividends, interest, and capital gains in the TFSA, you aren’t required to report the income or pay any tax on the income.
Preserve and grow your income by using your TFSA
By simply investing in the TFSA, you can earn up to 20% more income (depending on your tax rate). As a result, you will be able to compound your capital at a much faster rate.
The CRA (Canada Revenue Agency) just increased the TFSA contribution limit by $7,000 in 2024. If you were 18 years or older (and a Canadian resident) in 2022, you would have at least $19,500 of contribution capacity in the TFSA today.
Say you want to invest $15,000 for passive income today. Here are three quality stocks that could collectively earn you nearly $600 per year in passive income.
An energy stock with an impressive record
Canadian Natural Resources (TSX: CNQ) is an energy stock that has defied the odds when it comes to returns and dividend growth. While it operates in a cyclical industry, it has delivered a very good 13% compounded annual total return over the past decade.
The company has high grade assets that produce gas and oil at an exceptionally low cost. It has decades of reserves that can support stable growth for years.
This TFSA stock has increased its dividend for 24 consecutive years by a 21% compounded annual rate. That is one of the best dividend records in Canada.
It yields ~4% today. If you put $5,000 of TFSA cash in CNQ stock today, you would earn $53.55 quarterly, or $214.2 annually.
A safe long-term bet for a TFSA stock
Royal Bank of Canada (TSX: RY) has been a very good quality dividend stock. There is a reason that Royal is persistently Canada’s highest valued stock by market cap.
Royal Bank is diversified by geography and product category. It tends to be a market leader in almost all its categories. The bank has a conservative balance sheet and ample liquidity coverage.
RBC has been one of the top performing Canadian banks with a total return of 172% over the past 10 years. In that time, it has grown its dividend by a ~7% annual rate.
RY yields 4.2% today. Put $5,000 of your TFSA cash into Royal Bank stock, and you would earn $51.06 quarterly, or $204.24 annually.
A growth and income stock for your TFSA
Brookfield Asset Management (TSX: BAM) is an intriguing pick for dividends and growth in a TFSA. Brookfield is one of the leading alternative asset managers in the world.
BAM was recently spun-out from Brookfield Corp. to clarify its business structure. As a result, BAM has a very clean balance sheet and is essentially a pure fee-collection business.
The company is growing by a mid-teens rate as it continues to fundraise for new funds and increase assets under management.
It has already increased its dividend once by 18%. It plans to distribute 90% of earnings per share to shareholders. As it grows, BAM’s dividend should increase substantially. BAM stock yields 3.66%. A $5,000 TFSA investment would earn $45.32 quarterly, or $181.28 annualized.
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY |
| Canadian Natural Resources | $97.70 | 51 | $1.05 | $53.55 | Quarterly |
| Royal Bank of Canada | $131.94 | 37 | $1.38 | $51.06 | Quarterly |
| Brookfield Asset Management | $56.39 | 88 | $0.515 | $45.32 | Quarterly |
