The federal government introduced the Tax-Free Savings Account (TFSA) in 2019 to backstop the Registered Retirement Savings Plan (RRSP). But unlike the RRSP, you don’t need to show proof of income to open a TFSA. The eligibility requirements are simple: Canadians 18 years or older with a valid Social Insurance Number (SIN).
If you desire to earn $250 tax-free monthly income, understand that it is a long process. Fortunately, there’s a way to use the TFSA and make it happen. Maximize the annual limits as much as possible and engage in dividend investing.
Assuming the annual limit is fixed at $7,000, it would take 7.5 years ($52,500) to realize your goal, provided the dividend yield is at least 6%. It can be a single stock every year or several stocks that pay monthly dividends. The power of compounding works best if you can reinvest dividends 12 times a year.
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Quick-service restaurant
Only a few TSX companies pay monthly dividends. Pizza Pizza Royalty (TSX:PZA) in the quick-service restaurant industry stands out for its hefty 6.38% yield. This $482.6 million royalty corporation owns the valuable trademarks and trade names used by Pizza Pizza Limited (PPL) and its subsidiary, Pizza 73. The stock performance has been relatively stable for most of the year. SGR.UN trades at $14.57 per share and pays a mouth-watering 8.15% dividend.
The royalty model and high profit margins from the royalty pool enable Pizza Pizza to sustain its monthly payout. Based on its dividend track record of 20 years, this small-cap stock is suitable for long-term TFSA investors. Moreover, PZA’s dividend track record is 20 years and counting. It hasn’t missed a payout since July 2005.
In the third quarter (Q3) of 2025, total systems sales and royalty income increased 1.9% and 2% year over year, respectively, to $158.8 million and $10.2 million versus Q3 2024. Total restaurants in the royalty pool rose to 794 following 20 additional stores this year.
Paul Goddard, President and CEO of Pizza Pizza Limited, notes the heightened competition in the QSR category. “We’re responding by investing in digital ordering, improving speed of service, and delivering craveable new offerings that will differentiate our brand and drive growth,” he said.
Goddard reassured that it has been the company’s policy to distribute all available cash in order to maximize returns to shareholders over time.
Grocery-anchored REIT
Real estate investment trusts (REITs) are alternatives to owning real estate properties. However, Slate Grocery (TSX:SGR.UN) is focused on the commercial sector in prime U.S. markets. The $881.8 million REIT owns properties anchored by grocery stores. If you invest today, the share price is $14.88, while the dividend yield is 8.15%.
Two of its largest tenants are Walmart and Kroger. Fortunately, the e-commerce boom did not materially affect the businesses of the REIT’s grocery and essential-based tenants. Slate charges below-market rent.
In Q3 2025, net income climbed 55% year over year to US$11.2 million compared to Q3 2024. According to its CEO, Blair Welch, it was another quarter of strong results. “Given the complex macroeconomic environment, consumer spending on grocery and essential goods remains resilient,” he said.
Prolific income providers
Pizza Pizza and Slate Grocery REIT are small-cap stocks but are prolific passive-income providers. You can alternatively accumulate shares or allocate your TFSA limits equally between them.
