A Tax-Free Savings Account (TFSA) can turn into a steady income source when it’s filled with the right mix of investments. In fact, it’s not uncommon for a TFSA to bring in $500 a month or more.
The best part is that the goal of utilizing your TFSA to bring in $500 a month isn’t all that hard. All that’s needed is a mix of income investments that can generate steady cash flow while still offering some long-term growth.
Here are three TSX investments that could help push investors towards that goal.
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Generate monthly income from Canadian blue-chip stocks
The first pick to set up a TFSA to bring in $500 a month is BMO Canadian High Dividend Covered Call ETF (TSX:ZWC). This exchange-traded fund (ETF) holds a broad basket of some of the best Canadian dividend stocks on the market.
The fund also uses a covered call strategy to squeeze out extra income. Income is the focus here — not growth.
As of the time of writing, the fund offers a yield of 5.66% that is paid out on a monthly cadence. That monthly payout schedule also makes it easier for investors to visualize passive income building over time.
Enbridge brings pipeline cash flow and decades of dividends
Another option for investors seeking to utilize a TFSA to bring in $500 a month is Enbridge (TSX:ENB). Enbridge is one of the largest energy infrastructure businesses on the continent, offering multiple revenue streams that include pipelines, renewable energy generation, and a natural gas utility.
This setup gives investors exposure to several parts of the energy sector, each with its own mix of growth and stability.
Turning to income, Enbridge has been paying dividends for seven decades without fail. As of the time of writing, the quarterly dividend offers a yield of 4.91%, making Enbridge a solid contributor to any portfolio.
Long-term investors should also note that Enbridge has provided annual increases to that dividend for over three decades. This makes the company a solid option for investors considering a TFSA to bring in $500 a month.
Telus offers an ultra-high yield today and a turnaround tomorrow
Rounding out the three picks is Telus (TSX:T). Telus is one of Canada’s big telecoms, operating subscription-based services across wireless, wireline, TV, and internet segments.
That gives Telus defensive appeal and a recurring revenue stream. But in recent years, Telus has faced rising pressure from the fallout of elevated interest rates. Those rates made borrowing more expensive and pushed Telus to suspend its dividend-growth program.
As a result, Telus’s stock price dipped, which sent the telecom’s yield up to double digits.
Fortunately, Telus’s results show improvement over the past quarter, particularly as cost-cutting efforts begin to take effect. The stock price still hasn’t caught up, however.
As of the time of writing, Telus offers a yield of 10.06%, making it the highest-yielding among the options mentioned above.
For investors looking to use a TFSA to bring in $500 a month, this means that Telus offers a significantly higher yield. But it also means that the yield comes with a higher risk than the other two picks mentioned above.
How to use your TFSA to bring in $500 a month
To generate $500 per month, investors need to generate $6,000 per year in passive income. That may sound like a lot, but it becomes more realistic when viewed as a multi-year goal rather than a one-time event.
Inside a TFSA, dividends and distributions are not taxed. That means every dollar of income can either be withdrawn or reinvested to buy more income-producing assets. Over time, that snowballs into more income without the drag of yearly taxes.
In other words, investors who don’t need to draw on that income yet can choose to reinvest it, allowing those investments (and by extension, the income they produce) to continue compounding.
Here’s how a $30,000 investment could contribute toward that $500 monthly TFSA income target.
| Company | Recent Price | Amount Invested | No. of Shares | Dividend | Total Payout | Frequency |
| BMO Canadian High Dividend Covered Call ETF | $22.56 | $30,000 | 1,329 | $1.26 | $1,674.54 | Monthly |
| Enbridge | $78.98 | $30,000 | 379 | $3.88 | $1,470.52 | Quarterly |
| Telus | $16.64 | $30,000 | 1,802 | $1.67 | $3,009.34 | Quarterly |
| Total: | $6,154.40 | Monthly: | $512.87 |
