How to Use Your TFSA to Earn $113 Per Month in Tax-Free Income

Investors seeking to generate regular passive income can capitalize on Canadian stocks that pay dividends every 30 days. This strategy provides a consistent monthly income and can be optimized for tax efficiency when utilized within a Tax-Free Savings Account (TFSA), where dividends are shielded from taxation.

Against this background, let’s look at two fundamentally strong Canadian dividend stocks that can help you earn about $113 per month in tax-free income.

Northwest Healthcare Properties REIT

Northwest Healthcare Properties (TSX:NWH.UN) is an attractive TSX stock to add to your TFSA portfolio for monthly income. The real estate investment trust (REIT) operates a geographically diversified portfolio of high-quality healthcare real estate. Its properties include hospitals, outpatient clinics, multi-tenant medical office buildings, and rehabilitation centres. The essential nature of healthcare assets, combined with long-term leases and tenants supported by government funding, adds stability to Northwest’s financials and dividend payments.

With the population aging and urban centers expanding, the demand for healthcare services will grow, ensuring consistent demand for the REIT’s properties. Moreover, Northwest’s properties have a high occupancy rate of about 96% and inflation-indexed leases, which support organic growth. Additionally, the REIT’s long lease expiry term, which stood at 13.4 years at the end of the third quarter (Q3) of 2024, adds stability to its operations.

Its resilient real estate portfolio and high occupancy rate support its financials and payouts. The REIT currently distributes a monthly dividend of $0.03 per share, yielding around 7.4% based on its closing price of $4.86 on February 15, 2025.

Its resilient assets, high occupancy, and long lease expiry term position it well to deliver solid same-property net operating income. Additionally, its ongoing efforts to optimize its portfolio, streamline operations, and reduce debt will support future growth and its dividend payments.

First National

Investors looking for a reliable monthly income stream could consider First National Financial (TSX: FN). The company provides mortgage financing solutions in Canada’s residential and commercial real estate markets. It has a solid history of paying and consistently increasing its dividend, making it an attractive option for passive-income investors.

Recently, First National announced another increase in its monthly dividend, raising the annualized payout to $2.50 per share, which translates to a high yield of 6.2%. This latest hike marks the 17th dividend increase since 2006. In addition to regular dividends, shareholders received an extra boost with a special dividend of $0.50 per share.

Looking ahead, First National is well-positioned to sustain its payouts. The key driver behind its earnings growth is the increase in mortgages under administration (MUA). As the MUA expands, so does the company’s ability to generate steady income.

Moreover, the current economic environment could work in First National’s favour. Lower interest rates are likely to spur demand for mortgage financing, particularly in the multi-unit residential sector, where insured mortgage products remain in high demand. The company also benefits from strong relationships with mortgage brokers, diversified funding sources, and a significant mortgage renewal book.

With $44 billion in mortgages pledged under securitization and a $104 billion servicing portfolio, First National could continue to grow its income and cash flows, supporting its payouts.

Earn $113 tax-free every month

Northwest Healthcare Properties REIT and First National could be solid additions to your TFSA portfolio for generating tax-free yield. The table shows that an investment of $20,000 in each of these stocks can help you earn over $113 in tax-free income per month.