TFSA: Invest $20,000 and Get $860/Year of Predictable Passive Income

Looking for safe passive income that will grow and build wealth inside your TFSA. Check out this four-stock portfolio of quality dividend stocks.

| More on:
dividends grow over time

Source: Getty Images

The Tax-Free Savings Account (TFSA) is a great place to earn passive income because you don’t need to pay any tax whenever you earn a dividend. This can help significantly elevate your returns, especially over long periods of time.

You can build a solid, diversified dividend portfolio in your TFSA with $20,000. In fact, with that amount of cash you could earn $861.19 per year in steady growing passive income. Here’s a model portfolio that could help get you there.

Pembina Pipeline$47.281050.6675$70.09Quarterly
Royal Bank of Canada$135.2636$1.38$49.68Quarterly
Granite REIT$75.7566$0.275$18.15Monthly
Enghouse Systems$31.57158$0.26$41.08Quarterly
Prices as of March 22, 2024

A TFSA infrastructure stock

Pembina Pipeline (TSX:PPL) is a good TFSA stock if you just want to earn an elevated dividend and don’t mind modest capital returns. It operates one of the largest energy infrastructure networks in Western Canada.

Its diverse mix of assets and services is crucial for Canadian energy companies to get their products to market. Over 85% of its earnings are on long-term contracts, and this income stream largely funds its attractive 5.65% dividend.

The company has one of the best balance sheets in the infrastructure industry, so it is well-positioned to invest in growth opportunities in the coming years.

Pembina pays a $0.6675 quarterly dividend. $5,000 invested in Pembina stock would earn $70.09 quarterly, or $280.35 annualized.

A bank for steady passive-income investors

Royal Bank of Canada (TSX:RY) is another rock solid dividend stock for a TFSA. There is a reason Royal Bank is persistently considered the highest valued company in Canada.

It is a leader in personal and commercial banking across Canada. Likewise, it has a strong, diverse business that spans across the U.S. and internationally.

Royal Bank has grown its dividend per share by a 9% compounded annual rate over the past 20 years. The bank has a strong balance sheet, a leading capital ratio, mid-teens return on equity, and attractive mid-single-digit earnings-per-share growth.

This is not the cheapest bank, but it is one of the best. It has a yield of 4.1% today. A $5,000 investment in Royal Bank would earn $49.68 quarterly, or $198.72 of passive income annually.

A top long-term real estate stock for a TFSA

Another TFSA stock for passive income is Granite Real Estate Investment Trust (TSX:GRT.UN). It operates a premium portfolio of logistics, distribution, and warehouse properties in Canada, the U.S., and Europe.

These are infrastructure-like assets that help foster commerce around the world. It has an average lease term of six years and 95% occupancy (that should improve through 2024).

Granite’s long-term assets are supported by a resilient, low-debt balance sheet. This has helped Granite deliver 13 years of consecutive dividend growth.

It yields 4.4% today. Invest $5,000 of TFSA cash in Granite stock, and you would earn $18.15 monthly or $217.80 of passive income annually.

A software play for passive income

A final stock for a TFSA passive-income portfolio is Enghouse Systems (TSX:ENGH). It operates a mix of communication and asset management software businesses around the world. These are not the most exciting areas of technology. However, Enghouse can generate a considerable amount of cash from its companies.

It is sitting with a huge $240 million cash balance ready to deploy into acquisitions. Likewise, it has increased its dividend per share by a 17% compounded annual rate over the past decade (as well as paying a large special dividend).

  • We just revealed five stocks as “best buys” this month … join Stock Advisor Canada to find out if Enbridge made the list!

Enghouse stock yields 3.3%. A $5,000 investment in Enghouse would earn $41.08 quarterly or $164.32 for the year.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Robin Brown has positions in Enghouse Systems and Granite Real Estate Investment Trust. The Motley Fool has positions in and recommends Enghouse Systems. The Motley Fool recommends Granite Real Estate Investment Trust and Pembina Pipeline. The Motley Fool has a disclosure policy.

More on Dividend Stocks

Man considering whether to sell or buy
Dividend Stocks

Royal Bank of Canada Stock: Buy, Sell, or Hold?

Royal Bank of Canada (TSX:RY) has a high dividend yield. Should you buy it?

Read more »

Businessman looking at a red arrow crashing through the floor
Dividend Stocks

BCE’s Stock Price Has Fallen to its 10-Year Low of $44: How Low Can it Go?

BCE stock price has dipped 39% in two years and shows no signs of growth in the next few months.…

Read more »

Dollar symbol and Canadian flag on keyboard
Dividend Stocks

Invest $10,000 in This Dividend Stock for $3,974.80 in Passive Income

This dividend stock gives you far more passive income than just from dividends alone, so consider it if you want…

Read more »

Payday ringed on a calendar
Dividend Stocks

This 6% Dividend Stock Pays Cash Every Month

Can a 6% dividend yield help you build a monthly retirement income? An investment made right can help you build…

Read more »

Payday ringed on a calendar
Dividend Stocks

Passive Income: How Much Should You Invest to Earn $1,000 Every Month?

These three monthly-paying dividend stocks can help you earn a monthly passive income of $1,000.

Read more »

Dividend Stocks

3 Dividend Stocks to Double Up on Right Now

Some of these dividend stocks will take longer to recover than others, but they'll certainly pay you to stick around.

Read more »

TFSA and coins
Dividend Stocks

TFSA Passive Income: How Much to Invest to Earn $250/Month

Want to earn $250/month of tax-free passive income? Here are four Canadian dividend stocks to look at buying in your…

Read more »

stock analysis
Dividend Stocks

Meta Is Now a Dividend Stock, but This TSX Stock Is a Better Buy

Social media giant Meta is now a dividend payer but a TSX stock is a better buy for its 156-year…

Read more »