TFSA Income: 2 High-Yield TSX Dividend Stocks to Consider Now

A $7,000 TFSA contribution could generate over $400 in tax-free income using a BCE turnaround and a commodity-linked royalty payer, but only if both payouts stay covered.

Key Points
  • BCE’s dividend reset leaves a 5.6% yield, but debt and heavy AI/fibre spending keep the cushion tight.
  • Freehold’s 6.3% yield looks better covered with a roughly 57% payout ratio, but it depends on oil and gas prices.
  • Split $7,000 roughly evenly and you could earn about $413 yearly tax-free, while diversifying the income sources.

A Tax-Free Savings Account (TFSA) can become a tiny payroll department that sends money throughout the year without withholding tax, vacation requests, or suspiciously long coffee breaks. Using the 2026 contribution alone, two high-yield TSX stocks could generate more than $400 in annual income. The trick is ensuring those lovely payments have actual businesses standing behind them.

dividend stocks are a good way to earn passive income

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Make room first

The 2026 TFSA limit is $7,000, although investors may contribute more if they have unused room from earlier years. Withdrawals are tax-free and generally return as contribution room the following calendar year. Replacing money too early can create an overcontribution, so a CRA’s number deserves a quick visit before the buy button.

Dividends, interest, and capital gains earned inside a TFSA don’t produce an annual tax bill. Withdrawals also won’t increase taxable income or reduce federal income-tested benefits such as Old Age Security (OAS). That protection gives every reinvested dividend more room to compound, provided the payout survives.

Yield needs math

Dividend yield divides the annual payment by the share price. A falling stock can therefore make the percentage rise even when the business is deteriorating. Investors should also examine payout coverage, debt, and the cash required for future growth. A 6% yield supported by half the available cash is much more comforting than an 8% payment consuming every dollar and several prayers.

Payment frequency doesn’t change the total return, either. Monthly dividends are convenient for income, while quarterly payments can work just as well when reinvested. Combining the two can create a steadier TFSA paycheque, which leads to one telecom turnaround and one royalty producer.

A telecom reset

BCE (TSX: BCE) provides wireless, internet, television, media, and business technology services. Its dividend lost its old untouchable reputation after the company reduced it in 2025. That reset hurt existing shareholders, yet the smaller payment now consumes less cash while BCE stock spends heavily on fibre and artificial intelligence (AI) infrastructure.

Second-quarter revenue rose 1.5%, while adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) increased 1%. More interestingly, combined revenue from Ateko and Bell Cyber climbed 29%. BCE stock is also building a 300-megawatt (MW) Saskatchewan data centre, giving the company a path to earn from Canada’s growing demand for AI computing.

BCE stock pays $0.44 quarterly, or $1.75 annually. At writing, the shares yield approximately 5.6%. Management expects $2.1 billion to $2.3 billion of free cash flow in 2026, which should cover the current dividend, although that cushion isn’t enormous while construction spending remains elevated.

Collect the royalty

Freehold Royalties (TSX: FRU) offers a different route to income. It owns oil and natural-gas royalty interests across Canada and the United States. While other producers deplete capital expenditures on drilling, Freehold receives a percentage of production revenue. That keeps its capital requirements lower than those of a conventional producer.

Second-quarter funds from operations (FFO) reached $78 million, up 32% from the first quarter. Freehold paid $44 million in dividends, producing a comfortable 57% payout ratio, while reducing net debt by $24 million. Operators also drilled 300 gross wells across its lands, creating potential future royalty income without Freehold buying 300 very expensive drills.

The $0.09 monthly dividend equals $1.08 annually. At writing, Freehold yields approximately 6.3%, making it the more generous of these two Canadian dividend stocks.

COMPANYRECENT PRICENUMBER OF SHARESANNUAL DIVIDENDANNUAL TOTAL PAYOUTFREQUENCYTOTAL INVESTMENT
BCE$31.38111$1.75$194.25Quarterly$3,483.18
FRU$17.19203$1.08$219.24Monthly$3,489.57
TOTAL—314—$413.49—$6,972.75

Bottom line

There are points to consider, as always. BCE stock carries substantial debt and must turn its expensive AI and fibre projects into growing cash flow. Freehold depends on commodity prices and drilling activity it can’t control. Neither dividend is guaranteed, which makes an equal split more sensible than asking either company to carry the entire TFSA.

Together, BCE stock and Freehold could turn nearly the full 2026 contribution into $413.49 of annual tax-free income. Reinvesting those payments while BCE stock develops its AI business and new wells expand Freehold’s royalty base could make today’s TFSA paycheque considerably larger over time.

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

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