The Tax-Free Savings Account (TFSA) is an excellent place to earn income from stock investing. All investment income (capital gains, dividends, and interest) in the TFSA account is safe from tax. You keep everything you earn, and the Canada Revenue Agency (CRA) won’t come after you for any tax.
Canadians can save as much as 10 to 20% of their income by simply using the TFSA. The more income you keep, the more you can grow and compound your capital! As long as you follow the rules set by the CRA, the TFSA can be a simple way to drastically accelerate returns.
If you got $60,000 (and the contribution room) to invest in a TFSA, here are three stocks that could help you earn an average income of $240 per month.
Pembina Pipeline: An infrastructure play with a good dividend
Pembina Pipeline (TSX:PPL) is a great income stock for a TFSA. It has a low-risk business model, an elevated 5.2% dividend, and opportunities for growth.
Pembina is a crucial infrastructure provider to the energy sector in Western Canada. It provides everything from collection/egress pipelines to midstream facilities to export terminals.
Over 80% of its income is contracted. That sufficiently covers its dividend. Even through the COVID-19 oil crash in 2020, Pembina sustained its dividend.
Today, Pembina is in an excellent position. The energy company has been generating very strong free cash flow in the past few years. It has a sector-leading balance sheet. Pembina is now well-positioned to invest in new growth projects (like LNG export facilities on the BC coast).
$20,000 invested in Pembina stock at today’s price would earn $258.75 of quarterly income, or $86.25 averaged monthly.
Fortis: A safe and stable TFSA stock
Speaking about low-risk businesses, it’s hard to find better than Fortis (TSX:FTS). It isn’t growing fast (5-6% a year), but it will provide very safe income for a TFSA. FTS yields 4.2% right now.
Fortis operates 10 regulated utilities across North America. It provides essential gas and electricity transmission and distribution services. That means that it earns steady and foreseeable earnings. FTS has grown its annual dividend for 50 consecutive years!
The utility sector has been a bit beaten down due to worries over elevated interest rates. However, Fortis has a strong balance sheet with a secure, long-term debt structure. As interest rates come down, the market may start to warm up to this name again.
$20,000 invested in Fortis would earn $206.50 quarterly, or $68.83 averaged monthly.
TD Bank: Beaten down, but time to add to your TFSA
Another stock to add to a TFSA for income is Toronto-Dominion Bank (TSX:TD). This stock has had several issues in 2024 (money laundering scandal, botched acquisitions, etc.). TD stock has fallen by over 8% this year. Certainly, the issues are worrisome, but they don’t really change the larger business.
TD is one of the largest banks in Canada and the United States. Its retail and commercial network are nearly irreplaceable. It also has a strong capital ratio and a great balance sheet that should help it withstand any near-term challenges.
In the meantime, its price is down, and its dividend is elevated over 5%. If you put $20,000 into TD stock today, you would earn $248 quarterly, or $82.96 averaged monthly.
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY |
| Pembina Pipeline | $53.20 | 375 | $0.69 | $258.75 | Quarterly |
| Fortis | $57.12 | 350 | $0.59 | $206.50 | Quarterly |
| Toronto-Dominion Bank | $81.76 | 244 | $1.02 | $248.88 | Quarterly |
