An 11% Monthly Passive-Income Stock I’d Put My Whole TFSA Contribution Into

Timbercreek’s +11% yield can turn a $7,000 TFSA contribution into about $65 a month, but the payout coverage is tight.

Key Points
  • A $7,000 TFSA contribution invested at an 11.1% yield targets roughly $65 in monthly, tax-free income.
  • Timbercreek earns that income by lending on commercial real estate, mostly with first mortgages, and paying monthly dividends.
  • The dividend used about 98.5% of recent distributable income, so property and credit risks could force a cut.

A Tax-Free Savings Account (TFSA) can become the rare bill that pays you every month. One annual contribution invested at an 11.1% yield could produce nearly $65 in monthly income, which is enough to handle a streaming habit and still leave something for snacks.

Blocks conceptualizing Canada's Tax Free Savings Account

Source: Getty Images

Before you begin

The 2026 TFSA contribution limit is $7,000, although Canadians with unused room may contribute more. Unused room carries forward, while withdrawals generally return as new contribution room the following calendar year.

Investors should confirm personal room before contributing because excess amounts face a 1% monthly tax. Once the money is inside a TFSA, investment income and capital gains can generally grow tax-free, and withdrawals won’t normally reduce federal income-tested benefits.

A large monthly yield still requires inspection before anyone starts mentally spending it. Investors should examine dividend coverage, the source of the cash flow, and the possibility of losing capital. After all, receiving $65 while the investment falls $200 isn’t passive-income wizardry.

Consider TF

Timbercreek Financial (TSX: TF) is a mortgage investment corporation and alternative commercial real estate lender. It provides shorter-term financing to property owners who need faster execution or more flexible terms than traditional banks may offer.

Borrowers pay interest and lender fees; Timbercreek stock covers its financing and operating costs, and much of the remaining income reaches shareholders through monthly dividends. The current payment is $0.0575 per share, or $0.69 annually, coming to that 11.1% yield.

The company’s $1.24 billion mortgage portfolio is secured by income-producing real estate, primarily in Canadian urban markets. Approximately 94.7% of the portfolio consisted of first mortgages at the end of the first quarter, giving Timbercreek stock a stronger claim on the underlying property if a borrower runs into trouble.

Management also sees a strong transaction pipeline as commercial real estate activity recovers. Second-quarter results arrive July 29, giving investors an immediate opportunity to see whether new lending demand is supporting earnings and dividend coverage.

Considerations

At a recent price of $6.19, a $7,000 TFSA contribution would purchase 1,130 full shares and leave $5.30 uninvested. The position would generate approximately $779.70 annually, or $64.98 per month.

COMPANYRECENT PRICENUMBER OF SHARESANNUAL DIVIDENDANNUAL TOTAL PAYOUTFREQUENCYTOTAL INVESTMENT
TF$6.191,130$0.69$779.70Monthly$6,994.70

Reinvesting the payments at the same price could purchase roughly 125 additional shares during the first year. Those shares would begin producing their own dividends, allowing the monthly income to compound without inviting the CRA to dinner.

The dividend consumed 98.5% of first-quarter distributable income, up from 92.8% one year earlier. That leaves little room for weaker lending income, rising funding costs, or additional credit losses. Falling property values and borrower defaults could also reduce recoveries, while dividends aren’t guaranteed.

Bottom line

I’d therefore invest an entire annual contribution in Timbercreek only if the rest of my TFSA already contained diversified Canadian dividend stocks. If management improves coverage while converting its pipeline into profitable loans, today’s unusually high yield could build a much larger monthly paycheque before the share price finally catches up.

Fool contributor Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

More on Dividend Stocks

Blocks conceptualizing Canada's Tax Free Savings Account
Dividend Stocks

How I’d Structure My $14,000 TFSA for Constant Income

If you have $14,000 saved in your TFSA, here is one easy investment strategy to earn $50 of tax-free monthly…

Read more »

woman looks at iPhone
Dividend Stocks

I’m Not Selling Telus After the 55% Dividend Cut: Here’s Why

Contrary to what the market seems to be saying, Telus Corporation (TSX: T) still has a lot going for it.…

Read more »

monthly calendar with clock
Dividend Stocks

A No-Nonsense 3.7% Dividend Stock That Can Pay Retirees Monthly

This no-nonsense dividend stock has returned more than $3.4 billion to shareholders through dividends since 2013.

Read more »

dreaming of financial success
Dividend Stocks

3 Questions to Ask Before Buying a Dividend Stock

Buying a dividend stock? Here are three questions to help you look beyond the yield, with examples from Enbridge, Fortis…

Read more »

Woman in private jet airplane
Dividend Stocks

Make $100 a Month Tax-Free: How Much to Invest in Diversified Royalty and Where

The TFSA is the ultimate investment account to place your money and earn tax-free income.

Read more »

man in bowtie poses with abacus
Dividend Stocks

Passive Income From Dividends: What Canadians Can Realistically Expect

Here's the actual dividend math the passive income gurus won't show you.

Read more »

Blocks conceptualizing Canada's Tax Free Savings Account
Dividend Stocks

RRSP, TFSA or Both? A Quick Guide by Income Level

Your RRSP and TFSA are complementing accounts that you can use to shield your income from taxes.

Read more »

Real estate investment concept with person pointing on growth graph and coin stacking to get profit from property
Dividend Stocks

Buying Your First Home? The $8,000 FHSA Deduction Most Renters Miss

An eligible renter's $8,000 FHSA contribution can save $2,400 at a 30% tax rate, with the purchase date guiding investments.

Read more »