The Tax-Free Savings Account (TFSA) is one of the best tools available to Canadians to build long-term wealth. If used properly, it can provide decades of tax-free growth, allowing investors to generate monthly TFSA income.
Given $14,000 to start with, there are more than a few great options on the market. Here’s a look at a trio of picks that gives exposure to Canadian stocks, real estate, and a covered-call strategy that creates cash flow every month.
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Start building a monthly income flow
The first place that I would start is not with a stock, but an exchange-traded fund (ETF). More specifically, a covered call ETF such as BMO Canadian High Dividend Covered Call ETF (TSX: ZWC).
ZWC holds a portfolio of large Canadian dividend stocks while also using covered-call options to generate additional income. That gives investors multiple sources of income under a single ticker.
Instead of relying on a handful of individual stocks, investors get exposure to a broad group of Canadian dividend-paying companies. That includes the big bank stocks, the largest picks from the energy sector, utility stocks, and telecoms, to name just a few.
That strategy helps support its 5.73% yield and monthly distributions.
For our $14,000 portfolio, I would allocate half, or $6,000, to this covered call ETF to generate monthly TFSA income.
Add some higher-yield real estate income
The next pick I would add to generate monthly TFSA income is SmartCentres REIT (TSX: SRU.UN). SmartCentres is one of the larger real estate investment trusts (REITs) in Canada with a portfolio of approximately 200 properties.
Those properties are heavily focused on value- and necessity-based retail. As a result, they tend to draw in stable traffic and have high-occupancy rates.
Many of those properties are anchored by Walmart, which further helps boost traffic to the property as well as its surrounding secondary tenants.
In recent years, SmartCentres has also been expanding beyond traditional retail into areas including residential, self-storage, and mixed-use developments.
For income investors, however, the main draw is the monthly distribution. As of the time of writing, SmartCentres offers a yield of 6.35% that it pays out on a monthly cadence.
In our $14,000 portfolio to generate monthly TFSA income, I would put $4,000 toward a SmartCentres position.
Add another monthly payout
To round out the three picks to generate monthly TFSA income, I would put the remaining $4,000 toward RioCan Real Estate Investment Trust (TSX: REI.UN).
RioCan is another REIT that owns a large portfolio of necessity-based retail properties concentrated in major metro markets.
The REIT is also growing its portfolio of mixed-use properties that combine retail with residential space in high-demand metro market locations. This gives the REIT another source of potential long-term growth.
RioCan offers investors a monthly distribution and, as of the time of writing, offers a yield of 5.36%.
Building that $14,000 portfolio for monthly TFSA income
The three investments mentioned above offer diversification, growth, and income-earning potential. Here’s how those investments can come together to generate monthly TFSA income:
| Investment | Recent Price | Total Invested | No. of Shares | Dividend | Total Payout | Frequency |
| BMO Canadian High Dividend Covered Call ETF | $22.75 | $6,000 | 263 | $1.30 | $341.90 | Monthly |
| SmartCentres REIT | $28.77 | $4,000 | 139 | $1.85 | $257.15 | Monthly |
| RioCan Real Estate | $21.73 | $4,000 | 184 | $1.16 | $213.44 | Monthly |
| Total: | $812.69 | Monthly: | $67.71 |
Investors won’t retire on $67 per month, but it can form a foundation for a longer-term portfolio. When reinvested, those distributions can continue to compound with the TFSA tax-free until needed.
Add in future TFSA contributions, and that $72 monthly payout has room to keep growing over time.
