How to Use Your TFSA to Earn Ultimate Passive Income

Turn your TFSA into a tax-free paycheque with a grocery-anchored REIT that pays monthly and lets compounding do the heavy lifting.

Amy Legate-Wolfe

Author Bio Amy became interested in investing in 2018 after having her first daughter. After receiving a masters degree in journalism from Western University, she became frustrated that the finance industry remained a confusing place for Canadians like her: new parents, millennials, and other young people who needed to understand their finances. Now, Amy focuses on tech companies and renewable energy for growth opportunities, coupling that with long-term investing strategies and equities. She also provides investors with a daily newsletter, Canada Stock Digest, for daily market updates. Her work can also be found at Canada's National Observer, where she writes on the business side of climate action. Before joining Motley Fool Canada, Amy wrote for major news organizations including HuffPost, CTVNews.ca, and CBC. When she’s not researching investing strategies, Amy’s time is pretty much monopolized by her two wild daughters, but in what little spare time she has she loves to do yoga, go on walks with her dog, and travel with her husband. Social Media Follow Amy on LinkedIn and Canada Stock Digest. Favorite Investment Quote “October: This is one of the particularly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February.” – Mark Twain

Published November 24, 2025 8:30 pm EST

| More on: SGR.UN

Key Points

TFSAs shelter dividends, interest, and gains from tax, letting your income compound faster and be withdrawn anytime.
Fill your TFSA with reliable dividend stocks and monthly REITs, use DRIP early, diversify, and avoid risky too-high yields.
Slate Grocery REIT owns essential, grocery-anchored U.S. centres, boasts high occupancy, monthly payouts, and FFO coverage supporting its roughly 8% yield.

The Tax-Free Savings Account (TFSA) is made for passive income. Every dollar you earn, whether from dividends, interest, or capital gains, is completely tax-free. This lets your income compound faster without the Canada Revenue Agency (CRA) taking a cut. You can withdraw the income whenever you want without penalties, and the unused room grows annually. This gives you more space to build an even larger income engine over time. With the right mix of reliable dividend stocks, a TFSA becomes a lifelong, tax-free paycheque generator that’s simple to maintain and incredibly efficient for long-term wealth building.

Piggy bank with word TFSA for tax-free savings accounts. — Source: Getty Images

Getting started

Start by filling your TFSA with high-quality dividend stocks and monthly-paying real estate investment trusts (REITs). Ones whose payouts are steady, well-covered, and built on businesses that stay profitable through every economic cycle. Think of companies that sell essentials, operate infrastructure, or provide services people can’t live without. Then use dividend-reinvestment plans (DRIPs) early on to automatically buy more shares with each payout. This turns your dividends into even more dividends.

As your TFSA grows, diversify your income sources. This creates a constant flow of payouts throughout the year and protects you from relying on one sector alone. Be careful to avoid “too good to be true” yields, as sustainable income is far more important than chasing double-digit payouts that aren’t supported by cash flow. Once your TFSA reaches a comfortable size, you can switch from reinvesting dividends to collecting them as tax-free income.

The real “ultimate” passive income comes from patience. Consistent contributions, long-term holding, and dividend growth turn even a modest TFSA into a powerful cash machine. Over decades, many Canadian blue chips and REITs have raised their payouts faster than inflation. That way, your income doesn’t just stay steady — it grows.

Consider SGR

Slate Grocery REIT (TSX: SGR.UN) could be one of the very best ways to use your TFSA to earn ultimate passive income. The REIT owns more than 100 grocery-anchored shopping centres across the United States, leased to essential tenants like Kroger, Publix, and Walmart. These are businesses that generate foot traffic, whether the economy is booming or slowing. That stability gives SGR.UN a rare kind of income reliability. Consumers may cut travel, entertainment, or discretionary spending in a downturn, but grocery purchases never stop.

The yield is where Slate Grocery REIT really stands out. Right now, Slate offers an 8% dividend yield trading at just 15.3 times earnings. And because it pays monthly, you don’t have to wait for quarterly distributions like most dividend stocks. The payout is backed by strong occupancy rates near 95%, long-term leases, built-in rent increases, and a tenant mix that has proven remarkably recession-proof. Funds from operations (FFO) comfortably cover the dividend, meaning you’re not collecting an income that’s at risk of being cut.

What really elevates SGR.UN above other high-yield stocks is its defensive business model and long runway for stability. Unlike retail REITs exposed to fashion, electronics, or discretionary spending, Slate focuses on properties that consumers rely on daily.

Bottom line

In short, Slate Grocery REIT could be one of the purest, simplest, and most effective ways to turn your TFSA into a true passive-income machine. It offers high monthly cash flow, stability rooted in essential services, sustainable payout coverage, and long-term growth potential, all amplified by the tax-free compounding power of the TFSA. In fact, here’s what $7,000 could bring in on the TSX today.

COMPANY	RECENT PRICE	NUMBER OF SHARES	DIVIDEND	ANNUAL TOTAL PAYOUT	FREQUENCY	TOTAL INVESTMENT
SGR.UN	$15.17	461	$1.21	$557.81	Monthly	$6,994.37

For investors who want their money to work quietly and consistently in the background, SGR.UN offers exactly the kind of stress-free income engine that can pay you for life.