How to Transform $28,000 in TFSA Contributions Into a Reliable Income Source

The Bank of Canada has cut interest rates seven times since last year June, lowering its benchmark interest rates to 2.75%. Moreover, economists are predicting two more 25-basis-point rate cuts amid easing inflation and headwinds caused by the United States’s trade policies on the Canadian economy.

Therefore, in this low-interest-rate environment, investors should consider acquiring quality stocks that pay monthly dividends to earn a healthy, reliable passive income. An investment of $28,000 in the following three monthly-paying dividend stocks can generate over $140 every month. Meanwhile, you can avoid paying taxes by investing through your Tax-Free Savings Account (TFSA).

SmartCentres Real Estate Investment Trust

SmartCentres Real Estate Investment Trust (TSX:SRU.UN) owns and operates 196 properties located in key locations across Canada, with 90% of Canadians living within 10 kilometres of a company’s shopping centre. The company boasts a solid tenant base, comprising over 95% of tenants with a national or regional presence, and 60% of which offer essential services. It earns around 45% of its rental income from its top 10 tenants. Considering all these factors, the company has consistently maintained a healthy occupancy rate, which stood at 98.4% in the recently reported first-quarter earnings. Also, its same properties’ net operating income rose 4.1% during the quarter amid strong retention and increased demand for existing space.

Moreover, the Toronto-based REIT has permits to develop 59.1 million square feet of mixed-use properties. Of these permits, one million square feet of properties are currently under construction. Considering its healthy occupancy rate, rising net operating income on the same properties, and expanding asset portfolio, I believe the company is well-equipped to continue paying dividends at a healthy rate. It currently offers a monthly dividend of $0.1542 per share, which translates to a forward dividend yield of 7.22% as of the June 11th closing price.

Sienna Senior Living

Sienna Senior Living (TSX:SIA), which offers a range of senior living services, is my second pick. Last month, the company reported a solid first-quarter performance, with its revenue growing by 12.1% to $241.8 million. The increased occupancy, favourable rent rate adjustments, and higher care revenue in the retirement segment, as well as higher fund flows for direct care and private accommodation in the long-term-care (LTC) segment, boosted its topline. Supported by revenue growth, its adjusted funds from operations (AFFO) increased by 7.7%.

Moreover, the Markham-based company has completed $250 million worth of acquisitions year to date. Additionally, it is in the process of acquiring Hazeldean Gardens Retirement Residence in Ottawa for $85.3 million. Furthermore, the company concluded the first quarter with $445 million in liquidity, positioning it well to fund both organic and inorganic growth. Therefore, I believe Sienna, which currently offers a healthy dividend yield of 5.08%, could continue to reward its shareholders at a healthier rate.

Pizza Pizza Royalty

Pizza Pizza Royalty (TSX:PZA) is another monthly-paying dividend stock that I am bullish on due to its stable cash flows from its asset-light business model. The company operates 697 Pizza Pizza and 100 Pizza 73 brand restaurants through its franchisees. It collects royalties from its franchisees based on their sales. So, the company’s financials are less prone to commodity price fluctuations and wage increases. Therefore, the company’s cash flows are stable and reliable, allowing it to pay dividends consistently. Its forward dividend yield stands at 6.28% as of the June 11th closing price.

Meanwhile, PZA’s restaurant renovation program, new menu options, value offerings, and creative brand messaging could continue to drive its same-store sales in the coming quarters. Additionally, the company plans to increase its traditional restaurant count by 2-3% this year, which could drive its royalty income. Considering all these factors, I believe PZA’s future dividend payouts are safe, making it an excellent buy.