Here’s How I’d Turn $40,000 Into Consistent TFSA Income

This $40,000 TFSA could turn into over $1,000/year of growing passive income. You might get some good capital upside as well!

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Key Points
  • AltaGas (TSX:ALA): Invest $10,000 for a 2.5% yield and growth from utilities and booming midstream business, earning $62.31 quarterly.
  • Fortis (TSX:FTS): Allocate $10,000 for a 3.3% yield and stable dividend growth, providing $81.92 quarterly income.
  • Chartwell (TSX:CSH.UN) and Cenovus (TSX:CVE): $10,000 each in Chartwell for senior living demand (3% yield) and Cenovus for energy gains (2% yield), together earning $123.09 quarterly.

There is no better thing than earning tax-free income. The Tax-Free Savings Account (TFSA) can not only save you on tax, but it can help you make more money.

By choosing a wide assortment of dividend stocks, you can earn a steady, stable stream of income. If you are lucky (or just smart), you might also get some capital growth along the way.

If I had $40,000 to invest here is how I would stack my TFSA portfolio to optimize for a blend of growth and income.

coins jump into piggy bank

Source: Getty Images

AltaGas for a rising income stream

I’d first put $10,000 into AltaGas (TSX: ALA). This company has too many strong catalysts to ignore. Its regulated utility is growing at an above-sector rate. New customers/connection and data centre demand are long-term tailwinds.

Its midstream/export business is booming thanks to the war in the Middle East. With supply constrained, Asian markets are desperate for Canadian liquified petroleum gases (LPGs).

It yields 2.5% now. It has grown its dividend by a mid-single-digit rate. Your investment would earn $62.31 of quarterly income.

Fortis for dividend growth

Fortis (TSX: FTS) is the second stock I’d buy with $10,000. You just can’t argue with 52-years of consecutive dividend increases. The track record speaks to the quality of this company and the quality of its assets.

Fortis still has room for growth. In fact, it is targeting 7% compounded annual rate base growth over the coming five years. It has a low-risk growth profile and a strong balance sheet to support it. Dividends should still grow by a mid-single-digit rate in the years ahead.

This income stock yields 3.3%. A $10,000 investment would earn $81.92 every quarter.

Chartwell for a huge trend

For some real estate exposure, I would be looking to buy Chartwell Retirement Residences (TSX: CSH.UN). One trend that is not hard to miss is that Canada is aging. Baby boomers need a mix of housing, care, and community.

Chartwell provides all those essentials. It has a leading brand that makes it a first option when retirees contemplate downsizing. It is sitting close to 95% occupancy. Strong demand and cost management is helping drive rising margins.

It yields 3%. Your $10,000 investment would earn $24.75 monthly, or $74.25 averaged quarterly.

Cenovus for elevated energy prices

Cenovus Energy (TSX: CVE) is now one of Canada’s largest energy producers. It is also one of the largest refiners in Canada.

Cenovus’s acquisition of MEG Energy has become a major home run in 2026. Especially with oil prices floating over $80 per barrel, it is generating a tonne of cash. If this persists, it could hit net debt targets by the end of the year.

This energy stock is cheaper than major peers, so it has the potential for a re-rate. It yields 2%. Strong free cash generation has led to aggressive dividend increases since 2021. A $10,000 investment would earn $48.84 of quarterly income.

The Foolish takeaway

These may not be the highest yielding stocks. Yet, they all generate strong cash flows, have predictable growth, and pay rising dividends every year. This $40,000 TFSA portfolio would earn $267.32 of quarterly income, or $1,069 annualized.

COMPANYRECENT PRICENUMBER OF SHARESDIVIDENDTOTAL PAYOUTFREQUENCY
AltaGas$53.72186$0.335$62.31Quarterly
Fortis$77.63128$0.64$81.92Quarterly
Chartwell Retirement Residences$21.00476$0.052$24.75Monthly
Cenovus Energy$44.86222$0.22$48.84Quarterly

Fool contributor Robin Brown has no position in any of the stocks mentioned. The Motley Fool recommends Fortis. The Motley Fool has a disclosure policy.

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