In a TFSA (Tax-Free Savings Account), any returns generated by qualified investments such as bonds, stocks, mutual funds, and exchange-traded funds are exempt from Canada Revenue Agency taxes. So, investing in quality dividend stocks and holding them in a TFSA is a good strategy to create a passive-income stream.
The average TFSA balance at the end of 2023 was roughly $40,000. Let’s see how you can deploy this amount to make $100 per month tax-free by investing in these two monthly TSX dividend stocks.
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Slate Grocery REIT
Valued at a market cap of $713 million, Slate Grocery REIT (TSX: SGR.UN) owns and operates grocery-anchored real estate in the United States. With around $2.4 billion of real estate infrastructure in major U.S. markets, Slate Grocery’s portfolio is resilient, and its strong tenants provide unitholders with durable cash flows and the potential for capital appreciation.
In the second quarter (Q2) of 2024, Slate Grocery increased its rental revenue by 3% to US$51.8 million, while net operating income grew by 2.8% to US$41.4 million. Its adjusted funds from operations rose by 3.6% to US$14.09 million or US$0.23 per share, indicating a payout ratio of 92%.
Slate Grocery’s strong leasing at high spreads on its same-property net operating income rose 3.5% compared to the year-ago period. Moreover, it maintained strong leasing volumes at double-digit spreads. With vacancy rates near historical lows, Slate Grocery has enough runway to grow revenue over time. Further, Slate Grocery emphasized that new deals were completed at 28% above comparable average in-place rent, and non-option renewals were priced 12.8% above expiring rents.
Slate Grocery pays shareholders a monthly dividend of $0.1 per share, translating to a forward yield of 9.9%.
Whitecap Resources stock
Whitecap Resources (TSX: WCP) is valued at $7 billion by market cap and is part of Canada’s oil and gas sector. It pays shareholders a monthly dividend of $0.061 per share, suggesting a yield of over 7%.
The company’s strong production results across its Montney and Duvernay assets and its conventional assets in Alberta and Saskatchewan contributed to higher-than-expected production in the June quarter.
Whitecap Resources reported a funds flow of $426 million, or $0.71 per share, due to strong operational results and higher crude oil prices. It spent $203 million in capital expenditures, which means its free funds flow stood at $223 million. Comparatively, it returned $110 million to shareholders in the quarter, indicating a payout ratio of less than 50%.
Whitecap Resources ended Q2 with a net debt of $1.3 billion, indicating a net-debt-to-adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) of 0.6 times.
Priced at 6.3 times forward earnings, Whitecap stock is cheap and trades at a discount of 30% to consensus price target estimates. After adjusting for its dividend payout, total returns may be closer to 37% in the next 12 months.
The Foolish takeaway
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY |
| Slate Grocery REIT | $12.07 | 1,657 | $0.1 | $165.7 | Monthly |
| Whitecap Resources | $10.37 | 1,929 | $0.061 | $117.7 | Monthly |
An investment of $40,000 distributed equally between the two stocks would help you earn $3,396 in annual dividends, indicating a monthly payout of $283. In addition to a steady and recurring income stream, the two TSX dividend stocks trade at a discount to consensus price target estimates.
