TFSA Passive Income: How I’d Earn $400 a Month by 2026

Want $400 monthly tax-free? Here’s how to build reliable TFSA income and why Killam Apartment REIT could help.

| More on:
Key Points
  • Set a clear monthly target (e.g., $400/month = $4,800/year) and match contributions to your risk tolerance and timeline.
  • Prioritize sustainable yields from steady cash flow, low payout ratios, and monthly payers instead of chasing huge yields.
  • Killam Apartment REIT pays monthly, yields 4.1%, and shows low payout ratio, making it a practical TFSA income candidate.

Building monthly passive income inside your Tax Free Savings Account (TFSA) is all about turning your savings into a steady, tax-free paycheque. The goal isn’t only collecting dividends, it’s creating reliable cash flow that grows over time without eating into your capital. To do it right, you need to balance yield, safety, and sustainability. Here’s what to consider before you start.

Piggy bank with word TFSA for tax-free savings accounts.

Source: Getty Images

What to watch

First, decide how much monthly income you want and when you’ll need it. If you’re hoping for $400 per year, that means creating $4,800 annually. That can take a large investment, so be sure that what you hope to create can match what you’re willing to invest, identifying your risk tolerance before you dive in.

Then, look for sustainable yields, not just high ones. It’s easy to be drawn to stocks or real estate investment trusts (REIT) with 10% yields or higher! Yet those payouts often come with risks like debt problems or declining share prices. Sustainable yield comes from companies with steady cash flow, healthy balance sheets, and a history of maintaining or growing dividends.

Then, consider monthly payers that provide consistency like a paycheque. This will provide your TFSA with a smoother income stream. Once that income comes in, reinvest it until you need the income. While you’re still building, reinvesting through a dividend reinvestment plan will allow you to accelerate compounding, building larger future income.

KMP

In this case, Killam Apartment REIT (TSX: KMP.UN) could be a solid monthly dividend stock to consider for $400 monthly in 2026. First off, it checks the box of a monthly producer, paying about $0.06 per month or $0.72 annually. This gives it a dividend yield at 4.1% at writing, supported incredibly well by a 15.3% payout ratio!

Plus, Killam owns and manages multi-residential apartments, manufactured home communities and some commercial real estate in Canada, which can provide stable rental income in certain markets. Even better is the valuation, trading at just 3.9 times earnings right now, with future estimates trading at 13.6 times earnings. So investors are expecting more growth, all while trading at just 0.68 times book value.

Considerations

Now there are some risks as always. The recent historical dividend growth has been modest around 1% or 2% each year. Plus, apartments and manufactured home communities are sensitive to interest rates, property valuations, rental market conditions, and regulatory or tenant-risk exposures. If costs rise or tenants vacate, cash flow could be impacted.

That all being said, if you’re looking for a stable monthly income, then KMP does look like it’s well-suited to offer it. Investors will want to watch monthly distributions and occupancy rates, as well as its future growth outlook. However, if you’re looking for $400 per month, it’s doable. Here’s how much it would take at writing.

COMPANYRECENT PRICENUMBER OF SHARESDIVIDENDTOTAL PAYOUTFREQUENCYTOTAL INVESTMENT
KMP.UN$17.716,667$0.72$4,800Monthly$118,174

Bottom line

KMP looks like a solid option if you’re looking for a monthly dividend source. However, there are always risks involved with any investment, so be sure you discuss these with your financial advisor before making any investment decisions.

Fool contributor Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

More on Dividend Stocks

doctor uses telehealth
Dividend Stocks

Vital Infrastructure Is a Savvy TFSA Stock Paying 7% and the Price is Right

Vital Infrastructure Property is a defensive TFSA stock that gives investors high-yield income and predictable returns.

Read more »

ETFs can contain investments such as stocks
Dividend Stocks

No Time for Stock Research? This 1 ETF Does the Work for You

The iShares S&P/TSX Capped Composite Index Fund (TSX:XIC) eliminates the need for stock picking.

Read more »

woman holding steering wheel is nervous about the future
Dividend Stocks

Does Retirement Feel Far Away? These TSX Dividend Stocks Can Speed Things Up

These stocks have made some long-term investors quite rich.

Read more »

TFSA (Tax free savings account) acronym on wooden cubes on the background of stacks of coins
Dividend Stocks

How Much You Really Need in a TFSA to Make $500 a Month

It takes quite a bit of money to get $500 per month in a TFSA if you invest in index…

Read more »

up arrow on wooden blocks
Dividend Stocks

2 Great Canadian Dividend Stocks That Just Raised Their Payouts Again

These companies have delivered annual dividend growth for decades.

Read more »

a man relaxes with his feet on a pile of books
Dividend Stocks

TFSA Passive Income: 3 Incredible Stocks That Earn $2,148/Year

These Canadian stocks have a solid history of dividend distribution and are likely to sustain their payouts in the years…

Read more »

Offshore wind turbine farm at sunset
Dividend Stocks

While Interest Rates Sit Still, These 2 Dividend Giants Look Good

Looking for more income? Check out these two high-income stocks!

Read more »

The sun sets behind a power source
Dividend Stocks

Why This Canadian Utility Stock Could Be the Best Stock You Never Think About

This mini-Fortis (FTS) stock is a high-yield Canadian utility stock hidden in plain sight

Read more »