Use Your TFSA and Earn $67.20 in Passive Income Each Month

Did you know that over 70% of Canadians are now using their Tax-Free Savings Account (TFSA) to generate passive income? With the ability to grow investments tax-free, more Canadians are taking advantage of this account to boost their savings and create a steady income stream from dividends and interest! So, what is that 30% of people waiting for? Perhaps they don’t know how to get started, so here’s how!

Why the TFSA?

The TFSA is hands down one of the best tools for creating long-term passive income in Canada. With the ability to invest in stocks, bonds, and other income-generating assets, all the growth and returns in the TFSA remain completely tax-free. That means every dollar you make from dividends, interest, or capital gains stays in your pocket. Thus allowing your investments to compound more quickly over time. This compounding effect can snowball your wealth in the long run, thereby making it an ideal choice for passive-income seekers.

What’s even better is that the TFSA is incredibly flexible. You can withdraw your money whenever you need it without worrying about paying taxes or penalties, thereby making it perfect for both short-term goals and long-term income strategies. Whether you’re reinvesting dividends for future growth or relying on regular payouts to support your lifestyle, the TFSA offers unmatched freedom and tax advantages, thus making it a cornerstone for any Canadian looking to build steady, reliable passive income.

What to consider

For long-term growth, investors should look at passive-income stocks in sectors that offer stability and consistent returns over time. Utilities are a great starting point. Think of companies that provide essential services like electricity, gas, and water. These businesses tend to perform well regardless of economic conditions, making their dividends reliable. Another key sector is real estate investment trusts (REITs). These allow you to invest in income-generating properties like shopping centres, office buildings, or industrial spaces. REITs typically offer strong dividend yields and can grow steadily with the real estate market.

Another smart sector for long-term passive income is consumer staples. These are companies that produce everyday products, like food, beverages, and household goods. Things people continue to buy no matter what’s happening in the economy. Tech and healthcare sectors are also worth considering, especially companies that pay dividends. While these industries are known for growth, many established companies in these areas offer dividends. Thus, it gives you the chance to benefit from both income and the potential for capital appreciation over time.

Consider SmartCentres

SmartCentres Real Estate Investment Trust (TSX:SRU.UN) is an excellent option for long-term passive income in a TFSA, especially for those looking at the real estate sector. With a forward annual dividend yield of 7.18%, it provides a solid, consistent return for investors seeking stable income. The company has a strong leasing momentum, achieving 98.2% occupancy. A key factor that keeps rental income flowing steadily. Additionally, its extensive development pipeline offers growth potential, thereby making it more than just a stable income generator; it is also a growth opportunity in the REIT space.

SmartCentres also continues to expand its portfolio, with significant projects under development. This includes townhomes and self-storage facilities, which help diversify its income streams. For the second quarter of 2024, net rental income increased by 2.6%, driven by higher lease rates and new lease-ups, reinforcing its ability to maintain and grow cash flow. The trust’s focus on mixed-use development ensures long-term profitability, and its large-scale projects, like the Millway rental units, are already showing strong leasing activity, further bolstering its future growth prospects.

Bottom line

So, how much could you make? Let’s say you use your TFSA contribution room of $7,000 and see SRU grow by its compound annual growth rate of the last five years.

Now you’ll earn annual dividends of $503.03 and returns of $303.35! That’s total passive income of $806.38, coming out monthly at $67.20!