How to Turn a $14,000 TFSA Into a Cash Generating Machine

Here is the part most readers skip ahead to anyway. If you allocate $14,000 towards two Canadian pipeline stocks inside your Tax-Free Savings Account (TFSA), you could collect close to $730 in tax-free dividends this year.

The two names I would build that income stream around are Enbridge (TSX:ENB) and South Bow (TSX:SOBO). I think both TSX dividend stocks are top buys right now for those looking to create a low-cost passive income stream.  

Why a TFSA is the perfect home for dividend stocks

A TFSA is tax-sheltered, which means any returns generated in the form of dividends or capital gains are exempt from Canada Revenue Agency taxes.

Outside the TFSA, Canadian dividends get taxed at your marginal rate after the dividend tax credit. That is why slow, steady dividend payers belong in this popular registered account.

The annual TFSA contribution limit for 2026 is $7,000, while the maximum cumulative contribution room has risen to $109,000 this year.

Let’s see how you can create a low-cost, recurring passive income stream in the TFSA with just $14,000.

Two top TSX dividend stocks to own in the TFSA

Enbridge is among the largest energy infrastructure companies in the world. It moves a large share of the crude oil produced in North America and operates the largest natural gas utility on the continent, serving more than seven million customers.

At its annual meeting in May, chief executive Greg Ebel told shareholders that the company met or beat its financial guidance for the 20^th consecutive year.  

Moreover, Enbridge raised its dividend by 3% in 2026 and has increased the payout for 31 consecutive years. Given an annualized dividend of $3.88 per share, ENB stock offers a yield of around 5%.

Put $7,000 into Enbridge, and you would own roughly 89 shares. Those shares would pay you about $345 in annual dividends this year. And that figure should keep climbing, because management keeps raising the dividend.

South Bow is the newer, higher-yield play. It was spun out of TC Energy in 2024 and now runs the Keystone pipeline system, a crude oil corridor linking Alberta to U.S. refining hubs.

At its annual meeting, CEO Bevin Wirzba said the focus is on safe operations, disciplined spending, and a sustainable dividend.

South Bow trades near $51 and pays about $2.80 a year in dividends, indicating a yield of 5.5%. A $7,000 stake buys roughly 137 shares and pays about $383 this year.

Add the two together. Your $14,000 produces about $729 a year, or nearly $61 a month, completely tax-free. The blended yield is about 5.2%.

The Foolish takeaway

Pipelines carry heavy debt, and higher interest rates can impact profit margins and cash flows. South Bow also has an elevated payout ratio compared to Enbridge and is a higher-risk bet.

Both firms also face regulatory and political risk on new projects. That point came up directly at Enbridge’s meeting, when a First Nations leader challenged a proposed crude oil pipeline.

Even so, these are precisely the kind of boring, essential businesses income investors want. The two energy giants own hard-to-replace infrastructure, generate predictable cash, and offer a tasty dividend yield.

I rate both Enbridge and South Bow as top buys for a tax-free income portfolio. You can choose to reinvest those dividends, which should boost dividends over time.