The Canada Pension Plan (CPP) is a monthly taxable benefit that aims to replace a portion of your income in retirement. In 2025, the average monthly CPP payout is $848, while the maximum payment is $1,433 for a 65-year-old.
We can see that Canadians should focus on supplementing the CPP retirement benefit with other income streams to lead a comfortable life in retirement.
One low-cost way to create a tax-free passive-income stream is by holding quality dividend stocks in the Tax-Free Savings Account (TFSA).
So, let’s see how I’d supplement my CPP payout with consistent TFSA income.
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TFSA investors should buy this Canadian energy stock
Investors with exposure to fundamentally strong dividend stocks have the opportunity to benefit from steady passive income and long-term capital gains.
In the last 10 years, Enbridge stock has returned 20% to shareholders. However, if we adjust for dividend reinvestments, cumulative returns are closer to 121%.
Investors must identify a portfolio of companies across multiple sectors that are poised to maintain and even grow their dividend payouts over time. One such Canadian stock is Alvopetro Energy (TSXV: ALV), which offers you a forward yield of 8.2%.
Valued at a market cap of $238 million, Alvopetro Energy is engaged in the acquisition, exploration, development, and production of hydrocarbons in Brazil and Canada.
Is the dividend stock undervalued?
Alvopetro Energy is having a breakout year, having grown production by 50% year over year in the second quarter (Q2) of 2025. Moreover, it reported industry-leading operating margins above 80% while paying a dividend yielding over 9%.
The Brazil operation is the cash flow engine as Alvopetro upgraded its gas sales agreement with Bahiagas late last year, increasing firm volumes by 33%. Production in Brazil averaged around 2,300 barrels of oil equivalent per day in July, with natural gas fetching $10.62 per thousand cubic feet, substantially higher than pricing in North American markets.
Operating netbacks in Brazil hit $56.08 per barrel in Q2, up over $5 from the previous quarter. The company benefits from a low 4.2% royalty rate and qualifies for a reduced 15% income tax rate. Alvopetro is also debt-free with $15 million in cash on the balance sheet.
Management raised the quarterly dividend to $0.10 per share this year from $0.09 previously. Since initiating dividend payments in 2021, the Canadian dividend stock has returned $58 million to shareholders while reinvesting about half the cash flow into growth projects.
In Western Canada, Alvopetro entered a farm-in deal in February targeting the Mannville stack in Saskatchewan. The company has already drilled four wells in seven months using advanced open-hole multilateral technology.
CEO Corey Ruttan outlined a potential 52-well Canadian development that could build production to 1,400 barrels per day while generating $80 million in free cash flow after capital payback. Individual well costs run around $1.8 million gross, with Alvopetro owning 50%.
Analysts tracking Alvopetro Energy stock forecast net income to increase from $23.3 million in 2024 to $62.2 million in 2029. In this period, free cash flow is forecast to improve from $28 million to $72 million.
Given an annual dividend of $0.40 per share, Alvopetro’s dividend expense is around $15.4 million, indicating a payout ratio of 50% in 2026. It’s likely that Alvopetro will raise its annual dividend as cash flow margins continue to expand.
For a company trading at less than its proven reserve value and 45% of its probable reserve value, Alvopetro stock offers an unusual combination of yield, growth, and balance sheet strength.
