Use a TFSA to Earn $500 a Month With No Tax

In today’s uncertain economic climate, building passive income has become increasingly important. Beyond providing financial stability, it enables investors to preserve their purchasing power amid rising prices and to more efficiently work toward long-term financial goals. With interest rates remaining relatively low, monthly dividend-paying stocks can be an attractive option for generating steady and predictable income.

Investors can further enhance their returns by holding these investments in a Tax-Free Savings Account (TFSA), allowing them to receive monthly payouts without paying taxes. For individuals who were at least 18 years old in 2008, the cumulative TFSA contribution room has grown to $109,000. By allocating $105,000 equally among the following two stocks, an investor could potentially generate more than $500 in monthly passive income. Let’s take a closer look at these two opportunities.

SmartCentres Real Estate Investment Trust

SmartCentres Real Estate Investment Trust (TSX: SRU.UN) is a fully integrated REIT with 198 strategically located properties across Canada. It benefits from a high-quality tenant base, with approximately 95% of tenants operating at a regional or national level and about 60% providing essential services. Backed by this resilient portfolio, the REIT reported a strong 98.6% occupancy rate at the end of the fourth quarter.

The company also delivered solid operating momentum, with same-property net operating income (NOI) rising 2.9%, supported by lease-up and renewal activity. During the fourth quarter, it leased 35,500 square feet of vacant space, bringing total vacant space leased in 2025 to roughly 430,000 square feet. Lease renewals remained healthy, with average rental rate growth of 8.4%.

Beyond its core retail operations, SmartCentres has a substantial mixed-use development pipeline totalling 86.2 million square feet, including approximately 0.8 million square feet currently under active development. Given its defensive, retail-focused portfolio and ongoing expansion initiatives, the REIT appears well-positioned to sustain its distributions over the long term.

It currently pays a monthly distribution of $0.15417 per unit, yielding a 6.7% yield. Trading at a reasonable next-12-month (NTM) price-to-sales multiple of 16.8, the stock presents an attractive opportunity for income-focused investors.

Pizza Pizza Royalty

Another compelling monthly dividend stock for income-focused investors is Pizza Pizza Royalty (TSX: PZA). The company operates an asset-light business model, earning royalties from franchisees of the Pizza Pizza and Pizza 73 brands based on system-wide sales. Since the company does not directly operate the restaurants, its financial performance is less exposed to commodity price volatility and rising labour costs.

While seasonality is a natural feature of the restaurant industry, PZA aims to provide consistent monthly distributions to help smooth investor returns. It currently pays a monthly payout of $0.0775 per share, translating into a forward yield of 5.6%.

The company recently added 39 new restaurants to its royalty pool while removing 19 locations that ceased operations. As a result, its royalty pool now includes 712 Pizza Pizza locations and 102 Pizza 73 restaurants for the year. In addition, management continues to invest in digital platform enhancements, faster service initiatives, and menu innovation. These efforts, combined with its recently completed renovation program, could support higher customer traffic and improved same-store sales growth.

Given its stable royalty-based cash flows, asset-light structure, and ongoing growth initiatives, PZA appears well positioned to sustain — and potentially increase — its monthly distributions over time.