Investing in monthly dividend stocks within a Tax-Free Savings Account (TFSA) can significantly enhance tax-free income over time. For example, if you invest $50,000 in a portfolio of monthly dividend-paying stocks with an average yield of 5%, you would receive approximately $2,500 in dividends annually! This could come to $208 each month.
So how can you reach those high numbers? Let’s get into some of the best high-yielding dividend stocks on the market right now.
Freehold Royalties
If you’re on the hunt for a steady source of monthly passive income, Freehold Royalties (TSX:FRU) on the TSX is a stock that should be on your radar. With a market cap of $2 billion and a trailing Price/Earnings (P/E) ratio of 13.4, Freehold offers a robust and reliable dividend stream. The company currently provides an impressive forward annual dividend yield of 8.1%, making it a great choice for income-focused investors. Plus, Freehold’s payout ratio is at 108%, which indicates that the company is committed to returning capital to shareholders, even in a fluctuating market.
Freehold’s strong dividend appeal is backed by solid financials and operational performance. The company’s recent quarterly earnings show a profit margin of 46.4% and an operating margin of 61.7%, demonstrating its efficiency in generating income. With a return on equity of 16.2%, Freehold is effectively turning shareholder investments into profits. Additionally, the stock has shown resilience despite market volatility. This makes it a reliable choice for those looking to secure a steady, high-yielding dividend in their portfolio.
What’s more, Freehold’s diversified portfolio of royalty assets across North America provides a stable cash flow, which is crucial for sustaining its monthly dividend payouts. The company’s production is predominantly oil and natural gas liquids (NGLs), which are essential commodities in the energy market. This exposure to energy markets, combined with the company’s focus on efficient operations, ensures that Freehold is well-positioned to continue delivering consistent dividends to its investors.
Creating that income
Since the average Canadian earns around $60,000 per year, according to Statistics Canada, let’s say you can save 10% of your income. This would of course come to $6,000 annually.
To save that amount monthly, that would mean putting aside $500 each month. Once there, you can invest it in Freehold, earning passive income each and every month. Yet at the same time, you’ll also be earning returns. In the last five years, Freehold has had a compound annual growth rate (CAGR) of 13.5%! If that could happen again, here’s what could happen within a year.
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY | PORTFOLIO TOTAL |
| FRU – now | $13.60 | 441 | $1.08 | $476.28 | monthly | $6,000 |
| FRU – 13.5% | $15.44 | 441 | $1.08 | $476.28 | monthly | $6,809.04 |
In summary, Freehold Royalties offers a compelling case for dividend investors seeking monthly income. In fact, you could earn $809.04 in returns and $476.28 in dividend income. That’s total passive income of $1,285.32, or monthly at $107.11! And that’s just within a year.
With its strong financial performance, commitment to high dividend payouts, and strategic position in the energy sector, Freehold is a stock that can provide both stability and attractive returns, making it a valuable addition to any income-focused investment portfolio.
