TFSA 101: Earn $250 Per Month Tax-Free

Are you looking for income that lasts? This company can provide you with $3,000 per year, or $250 per month, just from dividends!

| More on:
TFSA (Tax free savings account) acronym on wooden cubes on the background of stacks of coins

Source: Getty Images

Monthly dividend stocks are like a steady stream of cash flow, making them one of the easiest ways to create passive income! Plus, with the power of compounding, reinvesting those monthly dividends can lead to exponential growth over time. These provide a great sense of financial security and help you build a portfolio that works for you — all while you sit back and watch your investments flourish, especially in a Tax-Free Savings Account (TFSA). So, let’s look at where to get started.

Where to look

When hunting for monthly dividend stocks, investors should first look for companies with a solid track record of consistent dividend payments. This usually means searching for businesses that have not only maintained but also increased their dividends over time. Checking the company’s payout ratio is also crucial. Ideally, it should be manageable, indicating that the company isn’t overextending itself to pay dividends. A well-established business with strong cash flow and profitability is often a safer bet for reliable monthly payouts.

Furthermore, investors should consider the overall health of the company and its growth potential. Look for stocks with a reasonable valuation. This means examining metrics like price-to-earnings (P/E) ratios and price-to-book (P/B) ratios to ensure you’re not overpaying for dividends. Furthermore, diversifying across different sectors can help mitigate risk, as economic downturns can affect industries differently. Lastly, it’s wise to keep an eye on any potential upcoming changes in company leadership or market conditions that could impact dividend sustainability.

Consider REITs

When it comes to finding strong monthly dividend stocks on the TSX, the real estate investment trust (REIT) industry is a standout performer. REITs are known for their attractive dividends because they are required by law to distribute at least 90% of their taxable income to shareholders. Many REITs focus on stable, income-producing properties like residential apartments, shopping centres, or office buildings. Thus making them a reliable choice for investors seeking monthly income. The combination of steady cash flow from rental income and the potential for property value appreciation makes real estate a compelling sector for monthly dividends.

Another industry to consider is the utility sector, where companies typically enjoy steady demand and predictable cash flows. Utilities provide essential services like electricity, water, and natural gas. This stability allows utility companies to maintain and often grow dividends, thus making them an appealing option for dividend-seeking investors. In addition to these sectors, some financial services companies and select telecom firms on the TSX also offer monthly dividends, thereby providing further opportunities to tap into the steady income stream that monthly dividend stocks can deliver!

One to consider

Investing in Dream Industrial REIT (TSX:DIR.UN) could be a fantastic opportunity, especially considering its attractive valuation and strong operational performance. With a market cap of approximately $3.95 billion and a forward P/E ratio of just 15.62, DIR.UN presents a compelling investment case for monthly income. The recent quarterly results showcase a 5.6% increase in net rental income and a steady growth in comparative properties’ net operating income (CP NOI), driven by strong performance in Canada and Europe. This stability is further underscored by the leasing of over 500,000 square feet in various development projects. Thus indicating a growing demand for their properties and a positive outlook for future revenue streams.

With a forward annual dividend yield of 5.13%, DIR.UN provides a steady income. Despite the slight dip in its stock price over the past year, the fundamentals remain strong. Thus making this an excellent entry point for investors. The REIT’s focus on enhancing value through development projects and its disciplined approach to asset management highlights its commitment to driving long-term growth, thereby making it a smart pick for those seeking reliable income and potential capital appreciation!

Bottom line

To make that $250 per month, you’ll need a total of $3,000 per year. So, here is what that would add up to on the TSX today for DIR.UN.

COMPANYRECENT PRICENUMBER OF SHARESDIVIDENDTOTAL PAYOUTFREQUENCYPORTFOLIO TOTAL
DIR.UN$13.954,286$0.70$3,000.20monthly$59,918.28

With that almost $60,000 investment, you’ll be adding an immediate extra $3,000! And that’s not even including returns for this top stock.

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 Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool recommends Dream Industrial Real Estate Investment Trust. The Motley Fool has a disclosure policy.

More on Dividend Stocks

woman retiree on computer
Dividend Stocks

1 Reliable Dividend Stock for the Ultimate Retirement Income Stream

This TSX stock has given investors a dividend increase every year for decades.

Read more »

calculate and analyze stock
Dividend Stocks

8.7% Dividend Yield: Is KP Tissue Stock a Good Buy?

This top TSX stock is certainly one to consider for that dividend yield, but is that dividend safe given the…

Read more »

grow money, wealth build
Dividend Stocks

TELUS Stock Has a Nice Yield, But This Dividend Stock Looks Safer

TELUS stock certainly has a shiny dividend, but the dividend stock simply doesn't look as stable as this other high-yielding…

Read more »

profit rises over time
Dividend Stocks

A Dividend Giant I’d Buy Over TD Stock Right Now

TD stock has long been one of the top dividend stocks for investors to consider, but that's simply no longer…

Read more »

analyze data
Dividend Stocks

Top Financial Sector Stocks for Canadian Investors in 2025

From undervalued to powerfully bullish, quite a few financial stocks might be promising prospects for the coming year.

Read more »

Canada national flag waving in wind on clear day
Dividend Stocks

3 TFSA Red Flags Every Canadian Investor Should Know

Day trading in a TFSA is a red flag. Hold index funds like the Vanguard S&P 500 Index Fund (TSX:VFV)…

Read more »

Paper Canadian currency of various denominations
Dividend Stocks

1 Magnificent Canadian Stock Down 15% to Buy and Hold Forever

Magna stock has had a rough few years, but with shares down 15% in the last year (though it's recently…

Read more »

Man holds Canadian dollars in differing amounts
Dividend Stocks

Earn Steady Monthly Income With These 2 Rock-Solid Dividend Stocks

Despite looming economic and geopolitical uncertainties, these two Canadian monthly dividend stocks could help you generate reliable income in 2025…

Read more »