Use Your TFSA, Earn $145.58 Each Month in Tax-Free Income

Are you looking to create some more income but don’t have the time? Use your TFSA and make some every month!

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

Source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Using a Tax-Free Savings Account (TFSA) to earn monthly tax-free income is a smart financial strategy for Canadians. The TFSA allows you to grow your investments without worrying about taxes on dividends, interest, or capital gains. This makes it an excellent vehicle for those seeking to build passive-income streams, especially through reliable dividend stocks. A stock like Pizza Pizza Royalty (TSX:PZA) can help you achieve that goal with its consistent monthly payouts and strong financial fundamentals.

Why Pizza Pizza

Pizza Pizza Royalty is a standout option for TFSA investors. The company, which operates a royalty pool based on sales from its franchised restaurants, generates a steady income stream that supports its attractive dividend yield. Currently, its forward annual dividend yield sits at approximately 7.24%, making it one of the more lucrative options in the TSX’s consumer discretionary sector.

PZA’s financial health is solid, as evidenced by its recent earnings report. For the quarter ending September 30, 2024, the company reported a net income of $31.13 million and a profit margin of 77.81%. While year-over-year revenue growth dipped slightly by 4.4%, the consistent profitability underscores its stability as a dividend payer. Furthermore, PZA’s payout ratio of 97.63% demonstrates its commitment to distributing earnings to shareholders, albeit leaving limited room for reinvestment.

What sets PZA apart is its resilience, even during periods of economic uncertainty. Over the past five years, it has maintained an average dividend yield of 6.7%. Thereby reflecting its ability to weather challenges and reward investors. Its beta of 0.90 also indicates lower volatility, a comforting factor for conservative investors seeking steady income.

Created with Highcharts 11.4.3Pizza Pizza Royalty PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.ca

Future outlook

Looking forward, PZA’s prospects remain promising. With consumer demand for fast and convenient dining experiences holding steady, Pizza Pizza’s royalties are likely to benefit. The company continues to expand its footprint and innovate its menu offerings, driving long-term revenue growth. Analysts have highlighted its well-managed operations and efficient cost controls as reasons to expect consistent performance.

By holding PZA in your TFSA, you can maximize the benefits of its high-yield monthly dividends. Since TFSAs shield your investments from taxation, every dollar you earn from PZA goes straight into your pocket. Over time, reinvesting these dividends can compound your earnings significantly, helping you reach your financial goals faster.

The stock’s current trading price, around $12.83, provides a relatively affordable entry point for investors. Given its stable price history, with a 52-week range of $12.31 to $15.09, PZA presents a balanced risk-reward profile. It also benefits from institutional confidence, with 16.69% of its shares held by institutions.

Bottom line

For investors looking to build a diversified TFSA portfolio, PZA complements other monthly dividend payers like SmartCentres REIT or Firm Capital Mortgage Investment Corporation. Its unique positioning in the consumer discretionary sector adds diversification to a portfolio heavily weighted in real estate or financials. In fact, let’s see how much a $7,000 investment could earn investors, with a dividend of $0.93.

COMPANYRECENT PRICENUMBER OF SHARESDIVIDENDTOTAL PAYOUTFREQUENCYTOTAL INVESTMENT
PZA – now$12.83546$0.93$507.78monthly$7,000
PZA – highs$15.09546$0.93$507.78monthly$8,239.14

Ultimately, PZA’s combination of high yield, monthly payouts, and proven resilience makes it an excellent option for Canadians looking to earn tax-free income through their TFSA. In fact, you’ve now earned $1,239.14 in returns and $507.78 in dividends, for a total of $1,746.92 in passive income. That comes to $145.58 each month! Its potential for steady returns aligns perfectly with the long-term goals of TFSA investors who value consistent, reliable passive income. With today’s low trading price and ongoing growth potential, Pizza Pizza Royalty could be the slice of financial stability your portfolio needs.

Should you invest $1,000 in Pizza Pizza Royalty Corp right now?

Before you buy stock in Pizza Pizza Royalty Corp, consider this:

The Motley Fool Stock Advisor Canada analyst team just identified what they believe are the Top Stocks for 2025 and Beyond for investors to buy now… and Pizza Pizza Royalty Corp wasn’t one of them. The Top Stocks that made the cut could potentially produce monster returns in the coming years.

Consider MercadoLibre, which we first recommended on January 8, 2014 ... if you invested $1,000 in the “eBay of Latin America” at the time of our recommendation, you’d have $20,697.16!*

Stock Advisor Canada provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month – one from Canada and one from the U.S. The Stock Advisor Canada service has outperformed the return of S&P/TSX Composite Index by 29 percentage points since 2013*.

See the Top Stocks * Returns as of 3/20/25

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 has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Confidently Navigate Market Volatility: Claim Your Free Report!

Feeling uneasy about the ups and downs of the stock market lately? You’re not alone. At The Motley Fool Canada, we get it — and we’re here to help. We’ve crafted an essential guide designed to help you through these uncertain times: "5-Step Checklist: How to Prepare Your Portfolio for Volatility."

Don't miss out on this opportunity for peace of mind. Just click below to learn how to receive your complimentary report today!

Get Our Free Report Today

More on Dividend Stocks

Dividend Stocks

3 Canadian REIT Stocks to Buy and Hold for the Next Quarter-Century

These three Canadian REITs trade cheaply and are highly reliable, making them some of the best stocks you can buy…

Read more »

A train passes Morant's curve in Banff National Park in the Canadian Rockies.
Dividend Stocks

1 Practically Perfect Canadian Stock Down 24% to Buy Now and Hold for Life!

CNR stock is a top Canadian stock for investors, especially with shares down on the TSX today.

Read more »

Canada national flag waving in wind on clear day
Dividend Stocks

The Best Canadian Stocks to Buy Right Away With $30,000

If you have $30,000 you're willing to invest, these are some of the first Canadian stocks to consider on your…

Read more »

rail train
Dividend Stocks

What to Know About Canadian Pacific Railway Stock for 2025

CP stock has now gone through a major merger, so what do investors have to look forward to?

Read more »

ways to boost income
Dividend Stocks

Top Canadian Value Stocks I’d Buy for Dividend Growth and Appreciation

If you are looking for income and capital appreciation, here are three Canadian value stocks for a great total return…

Read more »

coins jump into piggy bank
Dividend Stocks

The Smartest Canadian Stock to Buy With $2,000 Right Now

The company’s powerful combination of growth, income, and value, positions it well to deliver solid returns, making it a smart…

Read more »

Transparent umbrella under heavy rain against water drops splash background. Rainy weather concept.
Dividend Stocks

This 10.6 Percent Dividend Stock Pays Cash Every Single Month

Are you looking to invest for a rainy day? This 10.6% dividend stock pays cash every month, irrespective of the…

Read more »

A worker gives a business presentation.
Dividend Stocks

Market Dip: Opportunity or Risk This April?

This market dip might have investors worried, but should they be excited instead?

Read more »