Canadians saving and investing through the Tax-Free Savings Account (TFSA) pay zero taxes on interest, dividends, or capital gains earned within the account. Successful users also follow the governing rules to avoid paying penalty taxes.
Earning $500 tax-free income every month is achievable but requires utilization of annual contribution limits or available contribution room. Furthermore, your investment timeframe must be long-term.
Today, two affordable dividend stocks are Doman Building Materials Group (TSX:DBM) and Cardinal Energy (TSX:CJ). Both stocks trade at less than $7 per share but pay an average dividend yield of 9.6%. The table below shows the potential earnings from the $7,000 annual contribution in 2025.
| Company | Recent Price | No. of Shares | Div Per Share* | Total Payout* | Frequency |
| Doman | $6.99 | 500 | $0.56 | $280.00 | Quarterly |
| Cardinal Energy | $6.49 | 539 | $0.72 | $388.08 | Monthly |
*The Dividend per Share and Total Payout are annual; Divide the amount by 4 and 12 to get the quarterly and monthly dividend income from Doman and Cardinal Energy; The approximate investment in each stock is $3,500.
The example illustrates how you can benefit from the TFSA’s tax-free money growth feature. Assuming the dividend yields remain constant, the combined investment of $7,000 will produce nearly $500 in monthly tax-free income in a 24-year holding period. The period should shorten as you contribute more and accumulate shares.
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Diversified, independent operations
Doman operates in the industrial distribution industry and provides construction lumber and next-generation building materials to clients in North America. Its quarterly dividend (8% yield), payable on April 15, 2025, is the 60th consecutive board-approved quarterly dividend payment.
The $610.9 million vertically integrated global building material group operates distribution centres in Canada. Doman also operates treating plants, specialty planning mills, and specialty sawmills in the United States. In 2024, net earnings declined 28.5% to $54.2 million versus 2023 due to lower year-over-year pricing in certain construction materials categories.
Still, Amar S. Doman, Chairman and CEO of Doman, said, “We remain encouraged and pleased with the resilience of our diversified business model. Looking ahead, 2025 already has demonstrated it will have its own unique set of challenges, and we will maintain our discipline and focus.”
According to management, Trump’s tariffs will not materially impact Doman Building Materials. Besides the independent operations in Canada and the U.S., the businesses don’t rely materially on the other for products.
Dividend-paying growth stock
Cardinal Energy has displayed resiliency, notwithstanding the elevated market volatility. Current investors are up +2 year-to-date and partake in the juicy 11.1% dividend. This $1 billion oil and natural gas company is also a TSX30 winner in 2024, placing 29th among the 30 top-performing Canadian companies.
In 2024, revenue and earnings increased 3.8% and 5% to $500.3 million and $108.3 million, respectively, compared to 2023. Cardinal’s conventional oil business and low-decline asset base in Western Canada generate predictable free cash flow (FCF) and have low-sustaining capital requirements.
Cardinal Energy will expand into thermal development in 2025. Its Reford thermal project will commence full production in early 2026. The project could fund future thermal projects from internally generated cash flows.
Reach your goal
Canadians don’t need proof of income to open a TFSA. Achieve your desired income stream with regular yearly contributions and high-yield stocks like Doman Building Materials and Cardinal Energy.
