Today’s Perfect TFSA Stock: 6% Monthly Income

Peyto Exploration is a top natural gas stock benefitting from positive natural gas fundamentals and accelerating dividend growth.

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 June 9, 4:20 pm EDT

| More on: PEY

Key Points

• Peyto Exploration (TSX:PEY) is recommended as an ideal TFSA stock for income investors, with dividends growing 450% since 2020 to $1.32 annually and positioned to benefit from rising natural gas demand.
• The company posted record Q1 2026 results with 10% production growth, 44% EPS increase to $0.82, and achieved natural gas pricing 73% higher than Canadian benchmarks through hedging and market diversification.
• Strong structural demand from LNG exports and data centers, combined with Peyto's position as one of the lowest-cost natural gas producers, supports the investment case for maximizing TFSA contributions in this energy stock.

When it comes to investing, one of the most important lessons I’ve learned early on is to take advantage of everything at my disposal to maximize returns. This includes maxing out on my tax-free savings accounts, or TFSAs. Currently, the cumulative TFSA contribution limit stands at $109,000. If you haven’t maxed out on this account yet, I have the perfect TFSA stock to buy for a generous monthly income payout.

monthly calendar with clock — Source: Getty Images

Why Peyto?

Peyto Exploration and Development Ltd. (TSX:PEY) is a Canadian natural gas producer that operates in the very lucrative deep basin of Alberta. These top-quality assets have afforded Peyto with long-life and low-cost reserves. In fact, Peyto stock is currently one of the lowest-cost natural gas producers.

Why natural gas?

You might be asking yourself why I’m singling out a natural gas producer as one of my top stocks for your TFSA. The answer to this lies in the fact that natural gas is in high demand from a variety of different sources.

For example, the liquified natural gas, or LNG, industry is growing rapidly as the globe is turning to North America for its energy needs. In fact, Canada’s own LNG facility, LNG Canada, is quickly ramping up. This is expected to boost natural gas demand in the next few years. Also, data centres are being built at a rapid pace, and they require significant amounts of energy in order to keep them up and running.

The bottom line is simple – the natural gas industry is undergoing a structural shift. The forecasted demand that is expected in the next decade is likely to drive natural gas prices much higher.

Peyto – latest results

Peyto stock’s first quarter of 2026 was one that broke records on production, earnings, and cash flow. Production increased 10%, earnings per share (EPS) increased 44% to $0.82, and funds from operations increased significantly to $293 million.

The company is also continuing to drive costs down and this continues to create significant value. In fact, in the first quarter, Peyto’s cash costs declined another 10% to $1.28. This compares to Peyto realized price of $4.69 per million cubic feet (mcf) of natural gas, which was 73% higher than Canadian natural gas prices.

Peyto stock achieved this superior price through hedging as well as diversification. Purposeful exposure to markets such as Chicago and the Midwest U.S. allowed Peyto to achieve higher realized prices.

Shareholder returns

This natural gas stock is bigger, stronger, and more financially fit than ever. With this, the company is ready to give more back to shareholders. Peyto’s annual dividend per share has grown 450% since 2020 to the current $1.32. That’s equivalent to a compound annual growth rate (CAGR) of 33%. In Peyto’s most recent quarter, the company increased its dividend 9%. It is now yielding a very generous 5.6%.

The bottom line

I have confidence in Peyto as a top tax-free savings account, or TFSA, stock because the natural gas industry is undergoing a structural shift, which is boosting the natural gas demand profile. In this environment, Peyto is one of the lowest-cost producers with a strong track record and a rapidly growing dividend. Perfect for maximizing your TFSA contribution limit.