Who doesn’t want to earn a steady stream of income without the burden of taxes? While it may seem like a lofty goal, tax-free passive income is entirely achievable with the right investment strategy. By leveraging the benefits of the Tax-Free Savings Account (TFSA) and carefully picking monthly dividend stocks, you can create a reliable income stream that grows over time. Doing so not only could maximize your earnings from the TSX in the long run but also ensure that your money is working efficiently for you in a tax-free environment.
In this article, I’ll highlight two of the best monthly-paying dividend stocks you can add to your portfolio today to start earning $128 in passive income each month.
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H&R REIT stock
H&R REIT (TSX: HR.UN) could be the first monthly dividend stock on the Toronto Stock Exchange you may want to add to your TFSA for regular passive income. It’s a well-diversified North York-based REIT (real estate investment trust) with $10.3 billion in assets. The REIT currently has a market cap of $2.7 billion as its stock trades at $10.47 per share after rallying by nearly 18% over the last six months. It offers a 5.7% annualized dividend yield at the current market prices.
In the quarter ended in July 2024, H&R witnessed a 1.7% YoY (year-over-year) increase in its same property NOI (net operating income) on a cash basis due mainly to strong performance in the industrial segment with higher rents and occupancy rates. As a result, its funds from operations also slightly improved to $0.31 per unit in the last quarter compared to $0.30 per unit a year ago.
Interestingly, the REIT plans to shift its focus to residential and industrial properties by selling its office and retail holdings, which would allow it to concentrate on high-growth locations like Toronto, Montreal, and other high-growth U.S. cities. Besides its strong financial position and portfolio repositioning efforts, H&R REIT’s strong development pipeline makes its stock attractive for long-term income investors to buy now.
Sienna Senior Living stock
Sienna Senior Living (TSX: SIA) is another top TSX dividend stock that distributes its dividend payouts every month. This Markham-headquartered company currently has a market cap of $1.3 billion as its stock trades at $15.45 per share with roughly 35% year-to-date gains. At this market price, SIA stock has an impressive 6.1% annualized dividend yield.
In the latest quarter ended in June, Sienna registered a solid 18.5% YoY growth in its NOI to $46.1 million as the performance of its long-term care and retirement segments continued to improve. In addition, average occupancy in Sienna’s same property retirement portfolio climbed to 88.6% last quarter from 86.8% a year ago, which also resulted in a 10.7% YoY increase in its adjusted revenue to $219.5 million.
One of the key factors that brighten Sienna’s long-term fundamental outlook is the fact that Canada’s population of seniors in the 85-plus year age group is projected to surge significantly in the coming decades, which should create more demand for its services and boost its financial growth trends further.
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND PER SHARE | FREQUENCY | TOTAL MONTHLY PAYOUT |
| H&R REIT | $10.47 | 1,000 | $0.05 | Monthly | $50 |
| Sienna Senior Living | $15.45 | 1,000 | $0.0780 | Monthly | $78 |
| Total | $128 | ||||
| Prices as of Aug 29, 2024 |
Foolish takeaway
If you buy 1,000 per share of H&R REIT and Sienna Senior Living each right now, you can expect to earn about $128 per month from their dividends, which is equivalent to $1,536 a year. To buy these many shares at their current market prices, however, you’ll need to make an investment of $25,920. While this example should give you a good idea of how investing in quality dividend stocks from TFSA could help you earn reliable monthly passive income, you should always consider diversifying your stock portfolio instead of investing a large sum of money in just one or two stocks.
