The Tax-Free Savings Account (TFSA) in Canada is an efficient way to create tax-exempt passive income. A TFSA user can unlock the account’s full potential if the need is urgent. However, it would require a more aggressive, “high-yield” strategy to achieve the desired results.
Firm Capital Mortgage (TSX:FC) and SmartCentres (TSX:SRU.UN) are top picks in 2026 because of the expected low-rate environment. Freehold Royalties (TSX:FRU) is an ideal passive energy play minus the drillers’ risk. Their generous monthly dividends can turn a $14,000 TFSA into a cash-gushing machine.
Source: Getty Images
Regular and special year-end dividends
Firm Capital is a core pump in a TFSA cash machine in 2026 after the Bank of Canada suspended rate adjustments. As of January 28, 2026, the benchmark rate is down to 2.25% from 4.25% in September 2024. In addition to the hefty 7.64% yield, the financial stock pays monthly dividends.
The $450 million non-bank lender provides residential home and commercial short-term bridge and conventional real estate financing. Other lending activities include construction financing, mezzanine debt, and equity investments. As a mortgage investment corporation (MIC), Firm Capital doesn’t pay income taxes; it allocates 100% of net income for dividend payments.
Firm Capital’s diversified mortgage portfolio comprises mostly first mortgages. That is also why investors have been enjoying stable returns and consistent income streams for years. Besides not missing paying regular monthly dividends since 2013, the MIC has declared special year-end dividends every year.
Solid anchor tenant and development partner
SmartCentres owns and operates commercial, industrial, office, residential, and retail properties. The $4.6 billion real estate investment trust (REIT) facilitated Walmart’s entry into the Canadian market in 2024. It has become the giant American retailer’s only real estate development partner.
Walmart remains SmartCentres’s anchor tenant in 114 shopping centres, contributing 23% of total revenue. The portfolio consists of 197 income-producing properties. At the end of the third quarter (Q3) of 2025, the occupancy rate was 98.6%, owing to strong leasing momentum. Notably, according to management, about 84.3% of leases that matured in 2025 have been renewed and extended. The REIT also reported 6.2% year-over-year rental growth, including anchors.
SmartCentres’s development pipeline continues to grow. The self-storage facilities, two each in Quebec and British Columbia, will open in 2026 and 2027, respectively. At $17.19 per share, SRU.UN’s trailing one-year price return is +17.4%. The current dividend offer is 6.8%.
Lower-risk option
Freehold Royalties is a lower-risk option in the highly volatile energy sector. The $2.7 billion company is not an industry operator. Instead, it boasts a royalty-based business model. The royalties it collects from 380 oil drillers fund dividend payments. If you invest today ($16.56 per share), the dividend yield is 6.52%.
According to management, Freehold’s diversified, oil-focused portfolio and investment-grade operators in Canada and the U.S. provide cash flow stability. The royalty company does not worry about capital, operating, and abandonment costs because there are none.
Tax-free gush
The average yield of the three dividend stocks in focus is 6.98%. Assuming you allocate $4,666.67 worth of shares each to Firm Capital, SmartCentres, and Freehold Royalties, the monthly cash flow in a TFSA would be $81.43, or $977.20 annually. The tax-free “gush” could address your urgent financial need.
