While you could earn solid returns from long-term capital appreciation, one of the best ways to maximize your Tax-Free Savings Account (TFSA) is to generate consistent, tax-free passive income. By investing in high-yield dividend stocks with strong fundamentals, you could build a portfolio that pays you $312 every month — or $3,744 per year — completely tax-free.
In this article, we’ll highlight a top Canadian monthly dividend stock you can buy to maximize your TFSA passive income and show you how it could help you reach $312 per month in tax-free earnings.
A top monthly dividend stock for your TFSA
One monthly dividend stock that might fit the bill perfectly for TFSA investors looking for steady passive income is Sienna Senior Living (TSX:SIA). This Markham-headquartered firm is a major player in Canada’s senior living space. It offers various living options to seniors across Canada, including independent living, assisted living, and long-term-care services.
After jumping by nearly 29% over the last year, SIA stock currently trades at $15.62 per share with a market cap of $1.3 billion. That’s a solid performance, especially for an income-focused stock. On top of that, it pays a monthly dividend, and at its current price, the annualized dividend yield stands at an attractive 6%.
What makes it a great stock to buy now
In September 2024, Sienna’s occupancy rates in its retirement segment crossed the 90% mark for the first time in over five years, and its long-term care facilities are running near full capacity. In the third quarter of last year, the company’s adjusted same-property net operating income climbed by 14.7% YoY (year over year). Overall, its total adjusted revenue surged 12.5% YoY to $224.8 million, supported by higher occupancy, rental rate increases, and government funding support in its long-term-care segment.
But what makes Sienna truly exciting for long-term investors is its commitment to expansion and redevelopment. The company recently acquired a $181.6 million continuing care home portfolio in Alberta. This move is likely to strengthen its presence in Western Canada and immediately add to its earnings potential.
Besides that, Sienna has three major long-term care projects under construction, including a 160-bed redevelopment in Keswick. These long-term growth initiatives could significantly boost its cash flow over the next few years. Overall, with strong demand for senior living, a growing portfolio, and a high-yield monthly dividend, SIA stock could be a fantastic pick for TFSA investors looking for reliable, tax-free passive income.
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY |
| Sienna Senior Living | $15.62 | 4,000 | $0.0780 | $312 | Monthly |
| Prices as of Feb 11, 2025 |
Foolish bottom line
If you’re aiming to earn $312 per month, or $3,744 per year, in passive income from Sienna’s dividends, you can buy around 4,000 of its shares. To buy this many shares at the current market price, however, you’ll require an initial investment of approximately $62,480.
While this example should give you a clear idea of how to structure a TFSA for passive income, it’s important to consider portfolio diversification. Investing such a large sum of money solely in one stock, even a stable dividend payer like Sienna, always involves risks if market conditions or company fundamentals change.
