How to Use Your TFSA to Earn $300 in Monthly Tax-Free Passive Income

TFSAs are some of the best investment accounts available to Canadians. If used wisely, investors can easily establish a monthly, tax-free passive-income stream.

Here’s how investors can generate a cool $300 (or more) in monthly tax-free passive income.

Start with a juicy yield

In order to generate a cool $300 (or more) monthly tax-free passive income, investors need to pick those stocks that can pay out a juicy yield. One such stock to consider is Bank of Nova Scotia (TSX: BNS).

Scotiabank is one of Canada’s big banks and the most international of the big banks. That international segment provides a growing share of Scotiabank’s total revenue. The bank’s domestic arm provides a stable and recurring stream that allows the bank to invest in growth and pay out a handsome dividend.

Speaking of dividends, Scotiabank pays out a juicy quarterly dividend that works out to a yield of 6.27%. This makes the bank one of the top income-producing stocks to consider, particularly for those looking to establish monthly tax-free passive income.

Add a defensive investment with a crazy income

Most investors are aware of Enbridge (TSX: ENB) as one of the best long-term options to consider for any portfolio. Part of the reason for that can be traced back to the defensive nature of Enbridge.

Enbridge is best known for its lucrative pipeline segment. That segment hauls an incredible one-third of all North American-produced crude across that network. The pipeline business also includes a natural gas segment that hauls an impressive one-fifth of the natural gas needs of the U.S. market.

Perhaps best of all, the pipeline business is not dependent on the volatile price of the commodity being hauled. In other words, irrespective of which way oil prices move, Enbridge generates a reliable revenue stream that leaves room for growth and a healthy income.

And that’s not all. Enbridge also operates a large renewable energy portfolio as well as a natural gas utility business. The renewable arm alone comprises facilities in North America and Europe that include solar, hydro, and wind sites.

Both the natural gas and renewable energy units generate a reliable and consistent revenue stream.

The result is Enbridge’s 6.16% yield, which is one of the best yields on the market. Enbridge has also provided annual upticks to that dividend for three decades without fail.

Top it off with an alternative to owning a rental property

Owning a rental property was seen as one of the best ways to establish a passive-income stream. That is, at least until the prices of homes and, by extension, mortgages soared into the stratosphere.

Fortunately, RioCan Real Estate (TSX: REI.UN) offers an alternative to would-be landlords and those seeking a monthly tax-free passive-income source.

RioCan is one of the largest real estate investment trusts (REITs) in Canada. The REIT offers a massive portfolio of locations that generates a reliable revenue stream that is, in turn, passed on to investors.

That income is also dispersed on a monthly cadence, much like a landlord collecting rent.

The key differences over owning a rental property are huge: lower risk, lower upfront investment needs, and not needing to worry about tenants.

In other words, investors of this REIT can sit back and watch the distributions come in. As of the time of writing, that distribution works out to a juicy 6.22%.

Here’s your monthly tax-free passive-income stream breakdown

Apart from the obvious tax benefit from investing in a TFSA, investors can also benefit from reinvesting that income, allowing for some compounding magic to happen.

Specifically, allocating a cool $20,000 to each of the three investments noted above can provide just over $300 each month in tax-free passive income.

In my opinion, one or all of the above should be core holdings in any well-diversified portfolio.

Buy them, hold them, and watch your income (your tax-free passive income, that is) grow.