In today’s environment, earning additional income is not only a nice-to-have but a necessity. The Bank of Canada warns that geopolitical volatility could drive prices higher. To boost purchasing power, Canadians can use the Tax-Free Savings Account (TFSA) to generate income with no tax.
If you’re investing in dividend stocks, the capital requirement varies depending on the yield. As of 2026, the $7,000 annual contribution limit has raised the cumulative TFSA contribution room to $109,000 for those eligible since 2009. Thus, earning $500/month within the tax-sheltered account is realistic for many Canadians.
A $100,000 TFSA stock portfolio with an average yield of 6% will produce the desired result. However, if a lump-sum investment upfront isn’t possible, you can hit the target over time through consistent contributions. By maximizing your annual limit each year and reinvesting dividends, you harness the power of compounding. It would take 11 years, more or less, to achieve the milestone.
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Stable foundation
Ideally, a TFSA “monthly income” powerhouse strategy consists of two or more high-yield stocks with reliable dividend payment histories to mitigate risks. Freehold Royalties (TSX: FRU) can serve as the core holding, providing a stable foundation through its business model.
The $2.9 billion royalty company is not an oil producer or driller, but rather a “landlord” in the energy sector. Freehold collects royalties from over 380 industry operators in North America, including Exxon Mobil and Canadian Natural Resources Limited. It owns sizeable oil and natural gas properties in Canada and the United States.
Performance-wise, FRU has been steady thus far in 2026, benefiting from recent oil price shocks. At $17.90 per share, the year-to-date gain is 20.3%, while the dividend yield is 6.07%. Regarding dividend track record, the oil and natural gas royalty company hasn’t missed a monthly payout since May 1998.
Financial resilience is a salient feature of the royalty model. In 2025, royalty and other revenue increased 1.3% year over year to $313.5 million amid weaker commodity prices. Nevertheless, Freehold delivered record annual production of 16,294 barrels of oil equivalent per day (boe/d).
Given its lower-risk, high-margin business, particularly its “zero” capital costs, management is confident Freehold can generate meaningful cash flows and sustain its dividends.
Income accelerator
A suitable complement to Freehold Royalties is Plaza Retail (TSX: PLZ.UN). This $489 million REIT acts as an income accelerator, with its 6.32% dividend offer and $4.44 share price. The monthly distributions have been consistent since January 2022.
According to its president and CEO, Jason Parravano, 2025 was an important transition year for Plaza Retail. He noted the steady operating fundamentals and a portfolio positioned around non-discretionary retail.
In the 12 months ending December 2025, net operating income (NOI) and total comprehensive income increased 2.7% and 96.2% year over year to $77 million and $55.9 million. Demand for retail space was healthy, as evidenced by the 97.6% committed occupancy at year-end.
“From an operations standpoint, the portfolio continued to demonstrate resilience,” Paravano added. National retailers account for 91.1% of gross rents, and nearly 54% of revenue comes from essential needs retail.
Tax-exempt income
Earning $500 a month is an achievable and practical objective in today’s market. The TFSA and investments in reliable monthly-income stocks make the no-tax scenario possible.
