How I’d Transform $7,000 Into a Lifetime of Passive Income

Shares of dividend-paying companies are attractive investments to start a passive-income stream, even with a relatively modest amount like $7,000. Moreover, dividend stocks offering high yields and backed by fundamentally strong businesses with sustainable payouts can generate a lifetime of income.

Moreover, I’d leverage the Tax-Free Savings Account (TFSA) to optimize my passive-income stream. The TFSA allows your investments to grow and generate income entirely tax-free, thus enhancing the overall returns in the long term.

Against this background, here are a few select dividend-paying stocks I’d add to the TFSA to transform the 2025 TFSA contribution limit of $7,000 into a lifetime of passive income.

Telus

Canadian communication giant Telus (TSX:T) has been one of the most reliable dividend stocks to generate steady passive income for decades. Its solid fundamentals, ability to grow profitably, commitment to enhancing shareholder value through regular dividend increases, sustainable payouts, and high yield make Telus a must-have income stock.

The telecom service provider targets semi-annual dividend increases through its dividend-growth program. It has increased its quarterly dividend payments 27 times since 2011 and distributed more than $21 billion in dividends since 2004.

Telus currently pays a quarterly dividend of $0.4023 per share, translating into a high yield of over 7.7%. This high yield is supported by a sustainable payout ratio of 60-75% of its free cash flow.

Telus is well-positioned to enhance its shareholder value through higher dividend payments. The telecom company’s leading broadband network, focus on growing its customer base profitably, improvement in efficiency, and low churn rate will enable it to expand earnings, generate higher cash flows, and increase dividends.

Telus’s high-quality broadband and wireless networks have helped it consistently attract over one million new subscribers annually for the past three years. Moreover, its infrastructure investments are paying off through stronger customer retention, enhanced service quality, and rising cash flows. Overall, Telus is well-positioned to generate robust free cash flow, which will enable it to reinvest in business and return higher cash to its shareholders.

Scotiabank

Consider adding one of Canada’s top bank stocks to your TFSA for a reliable source of long-term passive income. Canadian banks are renowned for their robust dividend histories, with some of the top institutions consistently paying dividends for well over a century.

Among these, Scotiabank (TSX:BNS) looks attractive. It has an impressive track record of dividend payments dating back to 1833, which shows its ability to expand earnings. Moreover, the financial services company has increased its dividend by an average of 5% annually since 2014, reflecting its commitment to enhancing shareholder value through higher payouts.

Scotiabank’s focus on high-growth banking markets drives its financials. Moreover, the bank’s ability to expand its loan and deposit portfolios, coupled with a diversified revenue model, including wealth management and capital markets, provides a resilient foundation for future earnings growth.

Additionally, Scotiabank maintains strong asset quality and operational efficiency, supporting its profitability and ensuring consistent dividend payouts. Currently, Scotiabank offers a quarterly dividend of $1.06 per share, translating to an attractive annual yield of 6.1%.

Bottom line

Shares of Telus and Scotiabank combine high yields with dependable dividend payments and growth history, making them compelling income stocks.

The table shows that a $7,000 investment spread equally in these TSX stocks today could generate $120.54 in tax-free dividend income every quarter.