How to Use a TFSA to Earn $500 a Month Completely Tax-Free

Monthly dividend payors Tourmaline and Vital Infrastructure are solid options to consider for your tax-free TFSA income.

Karen Thomas, MSc, CFA

Karen is a stock market enthusiast focused on uncovering those stocks that she believes the market has mispriced. She does this through fundamental and quantitative analysis of companies and their industries, as well as a study of future opportunities and trends. She holds a Masters degree in Finance, the CFA designation, and has over 20 years of experience in the investment management industry. Having worked at a major pension fund, as well as two leading mutual fund firms as an analyst and portfolio manager, she has solid investing expertise which she aims to share with her readers.

Published May 26, 4:20 pm EDT

| More on: TOUVITL.UN

Key Points

• The article recommends two TFSA stocks to generate $500 monthly tax-free income: Tourmaline Oil Corp. (TSX:TOU) yielding 3.09% and Vital Infrastructure Property Trust (TSX:VITL.UN) yielding 6.67%.
• Tourmaline, Canada's largest natural gas producer, commits to paying 100% of excess free cash flow as dividends and expects 2026 free cash flow of approximately $900 million (140% higher than prior year) due to rising LNG demand and improved pricing.
• An investment of approximately $100,000 split between these two stocks in a TFSA would generate just over $500 monthly in tax-free income, with potential upside from Tourmaline's special dividends as natural gas prices are expected to rise.

10 stocks we like better than Tourmaline Oil

The tax-free savings account (TFSA) is a great help for investors trying to maximize investment returns. We are all in the same boat, looking for the highest returns while taking the lowest risk possible.

One of the least risky ways to maximize returns is through your tax free savings account (TFSA) contributions. Let’s discuss the best TFSA stocks to help you earn $500 a month in tax-free income.

Blocks conceptualizing Canada's Tax Free Savings Account — Source: Getty Images

Tourmaline Oil Corp.

As Canada’s largest natural gas producer, Tourmaline Oil Corp. (TSX:TOU) has paved the way towards maximizing shareholder returns. This has come in the form of dividends and share price appreciation.

Tourmaline stock made a commitment a few years ago to pay out 100% of its excess free cash flow in dividends. This meant that there were many special dividends that were paid as well as an increasing regular dividend.

In Tourmaline’s latest quarter, the company posted record production, and strong earnings and cash flow results. Despite weak Canadian natural gas prices, Tourmaline stock reported cash flow of $862 million and free cash flow of $202 million. Tourmaline’s free cash flow was 35% higher than in the same period last year despite lower natural gas prices. This was due to cost reductions, hedging, and strong liquids and LNG pricing.

Due to strong global liquids prices and improved access to Pacific propane exports, 2026 natural gas price realizations will increase by more than 30%. As a result, Tourmaline’s 2026 and 2027 cash flow and free cash flow outlooks have significantly improved. Therefore, the company’s 2026 free cash flow estimate is currently approximately $900 million, 140% higher than the prior year.

Canadian natural gas prices are expected to rise in the coming years as LNG Canada continues to ramp up, and demand from utilities and data centres continue to rise as well.

Tourmaline stock is currently yielding 3.1%.

Vital Infrastructure

Vital Infrastructure Property Trust (TSX:VITL.UN) is a global healthcare properties owner and manager. The company’s portfolio of properties includes medical offices, rehabilitation centres, and diagnostic facilities.

The true value of Vital’s portfolio of properties lies in the stability, resiliency, and predictability of their cash flows. These properties have long, sticky leases that are inflation-indexed. And they are in the healthcare sector, so that means that they can thrive regardless of the underlying economic backdrop. They are also benefiting from a really strong secular trend – the aging population. All of this makes Vital an ideal choice for investors’ dividend income needs.

The stock is yielding 6.7%.

The bottom line

Investors attempting to maximize investment returns can start with maximizing their TFSA contributions. This guarantees them tax-free investment income. Re-investing the tax savings can set investors up for compounding returns.

As you can see from the table below, investing approximately $100,000 of your TFSA contribution into these two stocks will earn you just over $500 per month. But that’s not all. Tourmaline is likely to increase its dividend and pay special dividends if natural gas prices rise as expected. This means that there’s strong upside to this $500 number.