A $7,000 Tax-Free Savings Account (TFSA) contribution could generate as much as $416 in annual passive income from one Canadian stock. But better yet, the cash would arrive every month and remain sheltered from Canadian tax inside the account. Suddenly, the annual contribution looks far more interesting than a lonely pile of cash waiting for inspiration.
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Putting the TFSA to work
The Canada Revenue Agency (CRA) set the 2026 TFSA dollar limit at $7,000. Unused room carries forward, while investment gains and income earned inside the account do not reduce contribution room. Investors should still confirm their personal limit before contributing, since excess contributions face a 1% monthly tax.
A TFSA becomes especially useful for dividend stocks. The income can remain in the account, fund future purchases, or eventually provide tax-free spending money. Monthly payments also make reinvesting easier, since fresh cash arrives 12 times per year.
Investors seeking that combination should consider Peyto Exploration & Development (TSX: PEY). At writing, Peyto stock traded around $24.22 and paid $0.12 per share each month. That creates an annualized dividend of $1.44 and a yield hovering around 6%.
About Peyto
So, why Petyo? Peyto stock produces natural gas and natural gas liquids from Alberta’s Deep Basin. The company focuses heavily on controlling costs, owning infrastructure, and selling gas into several North American markets rather than relying entirely on Alberta’s often-uncooperative benchmark price.
The latest results supported the higher payout. First-quarter production rose 10% year over year to a record 147,513 barrels of oil equivalent per day (boe/d). Funds from operations (FFO) climbed 30% to $293 million, while Peyto stock generated $139.7 million in free funds flow.
Management responded by raising the monthly dividend by 9% from $0.11 to $0.12 per share. The increase suggests Peyto feels confident about cash flow, although natural gas producers rarely receive permission to become boring.
The passive income
Investing the entire $7,000 annual contribution at a recent price of $24.22 would purchase 289 full shares. That position could generate $34.68 each month, or $416.16 over a full year, assuming the dividend remains unchanged.
| COMPANY | RECENT PRICE | NUMBER OF SHARES | ANNUAL DIVIDEND | ANNUAL TOTAL PAYOUT | FREQUENCY | TOTAL INVESTMENT |
|---|---|---|---|---|---|---|
| PEY | $24.22 | 289 | $1.44 | $416.16 | Monthly | $6,999.58 |
Peyto stock also trades at roughly 10 times trailing earnings, leaving investors with a reasonable valuation alongside the income. Those exploring other frequent payers can compare them with Canada’s leading monthly dividend stocks.
Know the risk
Peyto stock remains a natural gas producer, not a regulated utility. Falling gas prices, weaker drilling results, rising costs, or an aggressive capital program could pressure cash flow and the dividend. No monthly distribution comes with a tiny force field around it.
I also would not place an entire TFSA balance into one energy company. Putting one annual contribution into Peyto stock makes more sense when the broader portfolio already holds banks, utilities, infrastructure, and growth investments.
Bottom line
Peyto stock offers a nearly 6% yield, growing production, improving cash flow, and a recently increased monthly dividend. Investors comfortable with natural gas volatility could turn this year’s TFSA contribution into more than $400 of annual tax-free passive income, with another payment arriving every month while the long-term energy story continues to build.
