If you want to earn tax-free passive income, the TFSA (Tax-Free Savings Account) is your best bet. Not only can you contribute and invest tax free, but when you want to withdraw your cash, there is no tax consequence.
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The TFSA is the best place to grow passive income
Since you don’t have to worry about tax, your returns are your returns. That’s why the TFSA is so ideal for Canadians wanting passive income.
With the recently announced $7,000 TFSA contribution increase for 2025, Canadians can invest up to $102,000 in their TFSA. That is a substantial sum. The good news is that even half of that amount ($51,000) can provide a decent passive income stream.
In fact, with an average portfolio yield of 5%, you could earn $2,682 of tax-free passive income per year. Here’s one mini portfolio that could help you reach that goal.
An energy infrastructure stock for safe dividends
Pembina Pipeline (TSX: PPL) is a solid anchor for any TFSA portfolio focused on passive income. It has a resilient business that provides crucial energy infrastructure. Over 80% of its income is contracted. That gives sufficient support to its attractive 4.9% dividend yield.
The great thing is that its contracted income stream continues to grow as it brings on more infrastructure projects. The company certainly has the balance sheet and cash flow generation to support more opportunities.
Currently, it is developing one of only a few LNG export plants that have been approved in British Columbia. If it can complete that project on time and on budget, it could provide attractive returns ahead.
Pembina stock pays a $0.69 per share quarterly dividend. If you put $17,000 to work in Pembina stock today, you would earn $207 quarterly or $828 annually.
A real estate stock for steady passive income
Another excellent stock for passive income is Dream Industrial Real Estate Investment Trust (TSX: DIR.UN). Dream is one of the largest industrial property landlords in Canada. It also has a substantial portfolio in Europe.
Dream focuses on urban-focused, multi-bay, multi-tenant properties. These properties are attractive to a wide mix of tenants. It has strong 95%-plus occupancy.
Its good locations have supported substantial rent growth. In Canada, its average rental rate remains 38% below market. This just means there could be substantial organic rental rate growth to come.
Dream yields 5.5% right now. It pays a $0.05833 per unit monthly distribution. Put $17,000 of TFSA cash in Dream and you would earn $78.40 of monthly passive income, or $940 annualized.
A trucking stock with a big dividend
Mullen Group (TSX: MTL) is one of Canada’s largest logistics and transportation companies. Mullen was largely Western Canada and energy focused. However, it has significantly diversified its service and geographic focus in the past few years.
This hasn’t been a great stock for long-term shareholders. However, the business has really started to improve over the past five years. The stock has not moved in lock step with its improved earnings per share growth. That creates a bit of a value opportunity. Collect a nice dividend while you wait.
Mullen yields 5.4% right now. It pays a $0.21 per share quarterly dividend. All tallied, $17,000 invested in Mullen stock would earn $228.70 in quarterly passive income or $914.76 annualized.
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY |
| Pembina Pipeline | $56.50 | 300 | $0.69 | $207 | Quarterly |
| Dream Industrial REIT | $12.64 | 1,344 | $0.05833 | $78.40 | Monthly |
| Mullen Group | $15.61 | 1,089 | $0.21 | $228.70 | Quarterly |
