How to Use Your TFSA to Earn $227 Per Month in Tax-Free Income

Investing in Canadian stocks that pay dividends every 30 days can be a smart way to create a reliable monthly income stream. This strategy becomes even more attractive when combined with the Tax-Free Savings Account (TFSA), allowing investors to maximize their income without worrying about taxes on capital gains or dividends.

In this context, let’s look at two dividend stocks that can help you earn about $227 per month in tax-free income.

Monthly dividend stock #1

Investors could consider adding SmartCentres REIT (TSX:SRU.UN) stock to their TFSA portfolio to generate tax-free monthly income. It operates as a real estate investment trust (REIT) and distributes most of its earnings as dividends, enhancing shareholder value.

SmartCentres owns and operates a high-quality real estate portfolio anchored by essential businesses, including grocery stores, which provide financial stability through all economic cycles. With 195 mixed-use properties and high-traffic retail centers, the REIT enjoys strong tenant demand and steady occupancy rates, supporting robust rental income.

For instance, SmartCentres’s occupancy rate reached a five-year high of 98.7% in the fourth quarter (Q4) of 2024, and the company leased over 200,000 square feet of vacant space. Further, cash collections exceeded 99%, and it retained over 91% of its tenants. All these factors reflect the high demand for its properties and the strength of its lease agreements, which drive its same-property net operating income (NOI). Its NOI grew 3.8% year over year in Q4, while rental spreads surged 8.8%.

SmartCentres pays a monthly dividend per share of $0.154, which translates into a high yield of 7.3% (based on its closing price of $25.27 on March 25).

Beyond retail, SmartCentres is expanding into industrial, residential, and self-storage developments, diversifying its revenue and supporting long-term growth. With strong tenant retention, high occupancy, and a vast land bank for future projects, the REIT remains well-positioned to sustain and potentially increase dividends.

Monthly dividend stock #2

TFSA investors looking for tax-free monthly income could add First National Financial (TSX:FN) to their portfolios. The leading mortgage financing company has been paying dividends since 2006 and offers a high yield.

First National’s large and growing portfolio of mortgages under administration (MUA) and solid capital allocation strategy enable it to consistently pay and increase its dividend. It recently increased its monthly dividend to $0.208 per share or $2.50 per annum, reflecting a high yield of 6.3%. Moreover, the firm also paid a special dividend of $0.50 per share in 2024.

The financial services company is well-positioned to pay and increase its dividends in the coming years, driven by the steady growth in its mortgage portfolio. The company could also benefit from a favourable economic environment, including lower interest rates and higher demand for mortgage financing.

Further, its $44 billion portfolio of mortgages pledged under securitization and a $106 billion servicing portfolio positions it well to generate steady earnings and cash flow, supporting its payouts. Its significant single-family mortgage renewal book also bodes well for future income and dividend growth.

Earn $227 tax-free every month

SmartCentres REIT and First National are reliable monthly dividend stocks to add to your TFSA portfolio to generate a tax-free yield. The table below shows that a $20,000 investment in each of these stocks can help you earn over $227 in tax-free income per month.