Did you know that it is possible to earn $1,000 a year in passive income and pay no tax? The Tax-Free Savings Account (TFSA) allows Canadians to invest, earn income, and be completely safe from the Canada Revenue Agency.
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Use the TFSA for tax-free passive-income investing
There is no tax when you earn income and no tax when you withdraw. It makes for a very flexible place to invest for passive income. Stocks are a great place to look for passive income.
They are completely liquid, and you can diversify your investment to mitigate market and individual stock risk. If you are looking for ideas, this simple four-stock portfolio split evenly between $20,000 could earn over $1,000 annually. Here is how it could work.
Choice Properties
Choice Properties Real Estate Investment Trust (TSX:CHP.UN) earns a 5% yield today. If you put $5,000 into Choice stock, you would earn $20.73 monthly, or $248.71 annually.
Choice has an extremely defensive portfolio of grocery-anchored retail, industrial, and mixed-use properties. In fact, it is one of the largest REITs in Canada with an enterprise value of over $17 billion.
Choice has over 98% occupancy and very long lease terms (6.8 years). It just resumed a dividend growth posture, so there is passive-income upside over time.
A&W Food Services
A&W Food Services (TSX:AW) earns a 5.2% dividend yield. A $5,000 investment in A&W would earn $65.28 quarterly, or $261.12 annually.
A&W is an iconic fast-food brand in Canada. While it is best known for its popular burger and breakfast options, it is branching into other varieties through its Pret A Manger partnership. This is not a growth stock. However, it should chip out better than inflation returns over time.
It does carry a decent amount of debt, so you will want A&W to reduce that over time. As A&W continues to seek synergies from amalgamating with its operating entity, investors should enjoy improved returns in the coming years.
Pembina Pipeline
Pembina Pipeline (TSX:PPL) earns a 5.1% dividend yield. A $5,000 investment in Pembina would earn $62.48 of quarterly passive income, or $249.92 annually.
Pembina operates an essential energy infrastructure network in Western Canada. This is a well-run utility-like business where over 85% of its income is long-term contracted. That more than supports its dividend. Excess cash is being used to develop attractive projects like the Cedar LNG terminal in British Columbia.
This is one of the cheapest major energy infrastructure companies in Canada. It has a strong balance sheet, and its dividend has been growing annually for the past several years.
Dream Industrial: A real estate bet for passive income
Dream Industrial REIT (TSX:DIR.UN) earns a 5.4% distribution yield. A $5,000 investment would earn $22.58 of monthly passive income, or $270.90 annually.
Dream operates a high-quality portfolio of industrial, distribution, and warehousing properties across Canada, the United States, and Europe. These are well-located, multi-tenanted assets that have strong 95% occupancy and attractive rental rate growth opportunities.
Dream has seen its distribution payout drop considerably in the past few years. It could be time for it to start regularly growing its distribution. It’s a relatively cheap stock compared to its private asset value, so it could be a nice time to add this stock for passive income.
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY |
| Choice Properties REIT | $15.44 | 323 | $0.064 | $20.73 | Monthly |
| A&W Food Services | $36.55 | 136 | $0.48 | $65.28 | Quarterly |
| Pembina Pipeline | $56.71 | 88 | $0.71 | $62.48 | Quarterly |
| Dream Industrial REIT | $12.90 | 387 | $0.0583 | $22.58 | Monthly |
Prices as of February 3, 2026
