The Tax-Free Savings Account (TFSA) is a nice place to put dividend stocks. You don’t pay tax on any of the income that you earn in the account. While Canadian stocks get taxed favourably in a non-registered account due to the dividend tax credit, it is still better to pay no tax at all.
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Massively improve your returns by investing in your TFSA
In fact, individuals who invest inside their TFSA can improve their returns by 15-20% per year simply from tax savings. The great thing about the TFSA is that there is no tax when you withdraw, either. If you need the income from your investments, you can easily withdraw with zero consequence (other than you losing your contribution room for that year).
Canada has a plethora of dividend stocks to choose from. However, if you want a monthly income boost, there are only a few dividend stocks that have monthly payouts. If you want some TFSA monthly income, here are three TSX stocks to look at today.
A diversified company with a growing monthly dividend
Exchange Income Corp. (TSX:EIF) might be one of the most interesting monthly dividend stocks to look at today. Just a year ago, this stock was sitting with a 5% yield. However, its stock has soared by 76% over the past year.
Now, it only pays a modest 3% dividend yield. Yet, the company has been experiencing a wave of growth across its diverse mix of businesses. Its PAL business is seeing strong demand for air surveillance software and aerospace services. Rising defence demand continues to be a major tailwind.
Its northern air services continue to enjoy major contract wins as interest in Arctic resources and sovereignty increases. The addition of Canadian North vastly expands its long-term exposure to these themes.
Likewise, demand is exceeding what it can supply in its environmental access businesses. New factories should drastically expand Exchange’s market share.
Exchange pays a $ 0.23-per-share monthly dividend. It has raised its dividend 19 times in the past 21 years. While its yield is smaller, you can expect it to rise, especially if these tailwinds continue to persist.
A transport stock with a nice monthly yield
Mullen Group (TSX:MTL) is another attractive monthly dividend stock for a TFSA. This stock yields 5.1% right now.
Mullen is a major transportation and logistics provider in Western Canada and the United States. It has used an intelligent acquisition strategy to significantly diversify its operations in recent years. Despite a tough rate environment, it has still delivered solid results.
Given its modest valuation, its stock has held up reasonably well (up 10% the past year) compared to other transport peers. It pays a $ 0.07-per-share monthly dividend. Its dividend is supported by a modest payout ratio. This stock could really rise if the freight environment starts to improve in the next year or so.
A real estate stock to hold in your TFSA
The last monthly dividend stock to hold in your TFSA is Dream Industrial REIT (TSX:DIR.UN). It yields 5.4% today.
If you want to be a landlord but don’t want any of the work, Dream is the ideal stock to hold. It has an institutional quality portfolio of industrial properties across Canada and Europe. It has a diverse mix of tenants, well-located properties, long-term leases, and +95% occupancy.
It just created an attractive joint venture with the Canadian Pension Plan. The deal showed how undervalued its properties are compared to private markets. Dream trades at a discount to other industrial real estate investment trusts, so this investment has a value thesis.
Dream pays a $0.0583 per unit monthly distribution. Its payout ratio improved in recent years, so Dream may even commence a distribution growth posture in the coming years.
