Creating a passive income portfolio in your Tax-Free Savings Account (TFSA) technically requires nothing more than a few dividend stocks. But that’s the basic formula. If you add more variables to it, like a minimum yield threshold, your choices become a bit more limited.
However, a passive income created using dividend stocks that do not raise payouts (even offering impressive yields) would be vulnerable to inflation.
To get around this, you must stick to dividend aristocrats with adequately long histories of dividend growth. Relatively few stocks offer both reliable dividend growth and juicy yields.
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A telecom stock
BCE (TSX: BCE) is Canada’s most valuable telecom company and a giant in the sector, with millions of consumers in multiple business streams. It’s not the country’s top 5G company, but it still has its fair share in this market segment.
Like the rest of the telecom giants, BCE is currently heavily discounted. It’s trading below 37% of its five-year peak price. But this makes it an impressive pick from a passive income perspective because it has pushed the yield to a mouthwatering level. The 8.6% yield from BCE can help you generate about $215 a month with $30,000 invested.
Even if we disregard the current slump, BCE is not a great pick from a capital appreciation perspective. But the dividends more than make up for that lacking.
A financial stock
While bank stocks usually get the limelight in the financial sector (especially when it comes to dividends), there are plenty of other great picks. First National Financial (TSX: FN) is a prime example. It’s one of the largest non-bank mortgage lenders in the country and a generous dividend payer currently offering a juicy 6.1% yield.
At this yield, the stock can help you generate about $152 in monthly passive income. It has also grown its payouts for about 11 years and has a solid payout ratio history. The current payout ratio is solid at 64% as well. The stock has grown its payouts by roughly 25% in the last five years.
One of the factors behind this yield is the 23% discount the stock has been trading at. Its valuation is also quite attractive, considering a price-to-earnings of just 10.5.
An energy stock
TC Energy (TSX: TRP) is a solid dividend pick among Canadian energy stocks, and it’s more than just about its yield. The stock offered a much more compelling yield until a few months ago, but a bull market phase that pushed the stock up 33% in about half a year also pushed the yield down.
The 5.8% yield is still quite impressive for a well-established aristocrat growing its payouts for over two decades. You can create a passive income of about $145 a month with $30,000 invested at this yield.
Its business model is also worth taking into account. TC Energy is a pipeline giant, and most of its business is transporting natural gas. This makes it safer compared to upstream stocks that are vulnerable to energy price fluctuations.
Foolish takeaway
All three dividend aristocrats are ideal for creating a healthy TFSA-based passive income. They are offering generous yields, healthy business models, and stellar dividend histories, endorsing their ability to generate and grow dividends consistently over the years.
