TFSA Passive Income: Earn Over $600/Month

Canadian investors should consider using the TFSA (Tax-Free Savings Account) to create a steady stream of dividend income each year. Launched in 2009, the TFSA has gained popularity among Canadians due to its tax-sheltered status and flexibility associated with the registered account.

The maximum TFSA contribution limit for those starting deposits in 2009 has increased to $95,000 in 2024. So, let’s see how you can use the TFSA to create $7,200 per month in annual dividends, which translates to a monthly payout of $600.

While you can hold several qualified investments in a TFSA, investors should consider gaining exposure to quality, high-yield dividend stocks to create a low-cost passive-income stream. Here are two such TSX dividend stocks you can buy right now.

Slate Grocery REIT stock

Valued at $560 million by market cap, Slate Grocery REIT (TSX: SGR.UN) owns and operates a portfolio of grocery-anchored real estate. With more than $1.3 billion of real estate infrastructure in major metro markets south of the border, its grocery-anchored portfolio and strong tenant holders provide the company with durable cash flows across market cycles.

Slate Grocery pays shareholders a monthly dividend of $0.072 per share, translating to a forward yield of 9.2%.

In the June quarter, Slate Grocery completed over 700,000 square feet of total leasing at attractive rental rate increases, driving healthy net operating income growth. It completed more than 80,000 square feet of new deals at 28% above comparable average in-place rent, while on-option renewals were completed at 12.8% above expiring rents.

Slate Grocery explained the impact of several quarters of strong leasing at high spreads is translating to net operating income growth. In Q2, its same property net operating income rose by $1.4 million, or 3.5%, year over year. Moreover, its average in-place rent of $12.56 per square foot is well below the market average of $23.38, providing the REIT with enough runway for continued rent increases, which should result in higher future net operating income.

While REITs are capital intensive and sensitive to interest rates, 94% of Slate Grocery’s total debt is fixed with a weighted average interest rate of 4.5%. The REIT believes it trades at a 42.8% discount to net asset value, making it a compelling investment opportunity in 2024.

Fiera Capital stock

A TSX dividend stock with a forward yield of 11.9%, Fiera Capital (TSX: FSZ) is an investment manager that provides services to institutional investors, mutual funds, and private clients.

Part of the capital market sector, the performance of Fiera Capital is tied to global financial markets. In the last 12 months, Fiera Capital has reported revenue of $702.6 million, compared to $686 million in 2023.

Notably, Fiera Capital’s free cash flow in the last four months has totalled $162 million, while its dividend payouts were much lower at $72 million, indicating a payout ratio of less than 50%.

Given its attractive dividend yield, Fiera Capital stock is cheap and priced at 10 times trailing earnings. Moreover, analysts remain bullish on the stock and expect shares to rise by 12% in the next 12 months.

The Foolish takeaway

Investing a total of $68,570 distributed equally in the two TSX dividend stocks should help you earn $7,200 each year, or $600 every month, via dividends. However, investors need to identify other such quality dividend stocks and further diversify their portfolio, which lowers investment risk.