How to Structure a $50,000 TFSA for Practically Constant Income

Turn a $50,000 TFSA into a steady income stream with this mix of a covered-call ETF, telecom stock, and monthly-paying REIT.

Key Points
  • Diversified TFSA Investment Strategy: Investors can achieve a passive income stream with a $50,000 TFSA by diversifying across stocks, ETFs, and REITs.
  • Key Portfolio Components: The portfolio includes a diversified monthly income ETF, BMO Canadian High Dividend Covered Call ETF, and a high-yield telecom stock, Telus.
  • Maximizing Returns: SmartCentres REIT adds a defensive real estate income layer, helping the combined investments to generate over $3,800 annually.

Within a TFSA, investors have plenty of options to consider that can help to generate a passive income stream. In fact, given the right stocks and time, it’s not impossible to build a $50,000 TFSA that provides recurring stable cash flow.

That also means diversifying into different holdings such as stocks, ETFs and REITs, across a broad sector of the economy.

Here’s a portfolio of three different holdings to build out that $50,000 TFSA.

Blocks conceptualizing Canada's Tax Free Savings Account

Source: Getty Images

Start with a diversified monthly income ETF

BMO Canadian High Dividend Covered Call ETF (TSX: ZWC) can provide a foundation for your $50,000 TFSA portfolio.

The covered call ETF combines dividend income with cash flow generated from its covered-call strategy. Specifically, the fund holds a portfolio of dividend-paying Canadian companies while also using a covered-call strategy to generate additional option premium income.

For investors looking to build a $50,000 TFSA, the ETF’s biggest advantage is diversification. Rather than relying on the dividend payout of a single company, an investment in this ETF provides diversification and exposure to multiple sectors and businesses.

Another underrated factor is the payout itself. BMO Canadian High Dividend Covered Call ETF pays out those distributions on a monthly cadence. This makes it appealing for an income-focused TFSA that can be used to cover monthly bills or provide cash flow.

The ETF offers a yield of 5.7%, making it an ideal option for any $50,000 TFSA portfolio.

Add a high-yield telecom stock into the mix

The next addition to the $50,000 TFSA portfolio is Telus (TSX: T). Telus is one of Canada’s big telecom stocks. The company provides subscription-based services across different segments to customers across the country.

That includes wireless, wireline, TV and internet segments, all of which offer some defensive appeal. In fact, in recent years, the necessity of wireless and internet service has increased.

One of the main reasons why investors turn to Telus is for the yield that it offers. As of the time of writing, Telus offers a yield of 11.5%, making it one of the highest paying stocks on the market.

One of the reasons for that yield can be traced back to Telus’ efforts to improve its free cash flow and balance capital allocation priorities following years of elevated interest rates.

The telecom has since paused dividend increases while continuing to pay its quarterly dividend at the current level.

Despite that risk, Telus remains a solid part of this $50,000 TFSA portfolio.

Top it off with some monthly real estate income

The final layer to this $50,000 TFSA trio is SmartCentres REIT (TSX: SRU.UN). SmartCentres is one of Canada’s REITs, offering a portfolio of nearly 200 retail-based properties across Canada.

Those properties cater primarily to necessity-based retail, many of which are anchored by Walmart. This gives SmartCentres a defensive moat that’s hard to ignore.

Adding to that appeal is that those properties are strategically located in metro markets where traffic is higher. The necessity-based nature of that retail also means that customers will continue shopping regardless of how the market is faring.

That defensive appeal has helped SmartCentres maintain an impressive occupancy rate north of 98%.

Like other REITs, SmartCentres is also branching out into mixed-use development sites.  That gives SmartCentres another way to grow beyond the rent already coming in from its existing properties.

Speaking of income, SmartCentres offers a monthly distribution that works out to a yield of 6.1%.

What a $50,000 TFSA could generate

A $50,000 TFSA has enough capital to spread a decent investment amount across all three positions while keeping the portfolio focused on income.

Together, the three investments can produce cash flow while reducing any dependency on a single stock. Here’s how that investment pans out across all three holdings, producing just over $3,800 each year.

CompanyRecent PriceTotal Invested No. of SharesDividendTotal PayoutFrequency
BMO Canadian High Dividend Covered Call ETF$22.35$17,000760$1.27$965.20Monthly
Telus$14.65$16,0001,092$1.67$1,823.64Quarterly
SmartCentres REIT$30.36$17,000559$1.85$1,034.15Monthly
    Total:$3,822.99 

Fool contributor Demetris Afxentiou has no position in any of the stocks mentioned. The Motley Fool recommends SmartCentres Real Estate Investment Trust, TELUS, and Walmart. The Motley Fool has a disclosure policy.

More on Retirement

warehouse worker takes inventory in storage room
Dividend Stocks

REITs Are Falling as Bond Yields Rise: This Canadian Landlord Looks Better After the Selloff

Granite REIT has fallen about 17% from its 52-week high as higher bond yields pressure real estate stocks.

Read more »

Agricultural harvesting at the last light of day, aerial view.
Dividend Stocks

Canada Wants $70 Billion in Trade With India: I’d Watch This TSX Stock

Nutrien gives Canada’s India trade ambitions an existing commercial engine, but profitable fertilizer sales still have to follow.

Read more »

Piggy bank with word TFSA for tax-free savings accounts.
Dividend Stocks

How Big Does Your TFSA Need to Be to Pay $1,000 a Month?

A TFSA yielding 6% would need roughly $200,000 to produce $1,000 in average monthly income.

Read more »

Data center servers IT workers
Dividend Stocks

Data Centres Need Power, but Higher Rates Change the Math: I’d Watch This TSX Stock

The computers may be futuristic. Getting paid for supplying their electricity is pleasantly old-fashioned.

Read more »

Warning sign with the text "Trade war" in front of container ship
Stocks for Beginners

Tariffs Are Squeezing Canadian Businesses: This TSX Stock Has More Pricing Power

Tariffs are raising costs across Canada, making the ability to protect margins increasingly valuable.

Read more »

man looks surprised at investment growth
Dividend Stocks

Withdrawing From Your TFSA? This Timing Mistake Could Cost 1% a Month

A TFSA withdrawal is tax-free, but replacing it too soon can accidentally create an expensive overcontribution.

Read more »

money goes up and down in balance
Dividend Stocks

Foreign Money Is Pouring Into Canadian Banks: Is This One Still Worth Buying?

I’d still consider BNS for a long-term portfolio, although I’d build the position gradually rather than chase a rally that…

Read more »

woman stares at chocolate layer cake
Dividend Stocks

No Retirement Savings at 40? Here’s What $500 a Month Could Still Build

Starting retirement savings at 40 still leaves decades for a modest monthly investment to compound into a substantial portfolio.

Read more »