Seasoned investors know that the Tax-Free Savings Account (TFSA) is one of the best vehicles for long-term wealth building. The right TFSA setup can become a powerful tool for investors.
That’s partly because every distribution added to a TFSA can be withdrawn tax-free or reinvested to purchase more shares.
There’s no shortage of investments that can generate income, but some investments are better suited to building a recurring monthly payout.
Here’s how to build that portfolio given an initial $30,000 investment split across the following investments.
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Build the foundation of this TFSA setup with XEI
iShares S&P/TSX Composite High Dividend Index ETF (TSX: XEI) is the first component in this TFSA setup. In this case, the role of the fund is to serve as the foundation of the portfolio.
For those unfamiliar with the fund, XEI holds a broad cross-section of established Canadian dividend stocks. That includes exposure to banks, utilities, telecoms, and energy companies, to name just a few.
By including XEI in this TFSA strategy, investors gain instant diversification across dozens of Canadian dividend stocks.
And perhaps best of all, the fund offers investors a distribution that is paid out on a monthly cadence. As of the time of writing, the exchange-traded fund (ETF) pays out a yield of 3.37%.
Add industrial real estate through Granite REIT
The next part of this TFSA setup includes an investment in Granite REIT (TSX: GRT.UN). Granite is one of the better-known Canadian real estate investment trusts (REITs) that also has a global portfolio.
The REIT owns industrial properties across North America and Europe. That portfolio, which spans 145 properties and 61.5 million square feet, includes logistics, warehouse, and other industrial sites. That also includes distribution centres used for e-commerce fulfillment.
Finally, the REIT maintains an occupancy rate of nearly 98%.
In the most recent quarter, Granite reported an 8.3% increase in constant-currency same-property net operating income on a cash basis. The REIT also ended the quarter with an adjusted funds from operations payout ratio of 70%.
Turning to income, Granite pays out a monthly distribution, which, as of the time of writing, works out to 4.04%.
Increase the monthly income with RioCan
Wrapping up the TFSA setup is RioCan REIT (TSX: REI.UN). RioCan is one of the largest REITs in Canada and owns a portfolio of necessity-based retail properties across densely populated metro markets.
Many of those properties are anchored by grocery stores, pharmacies, and other retailers that draw regular customer traffic. The company has also diversified over the past several years into mixed-use residential properties.
These properties provide a complementary revenue stream, support traffic for nearby retailers, and help meet the demand for additional housing in metro markets.
As of the most recent update, RioCan boasts a committed occupancy in its retail portfolio of 98.8%. Additionally, diluted core funds from operations per unit increased by 5.3% in the most recent quarter.
In terms of a distribution, RioCan offers a monthly payout that carries a yield of 5.61%.
How this TFSA setup generates over $110 a month
Together, the three investments provide growth, income, and plenty of diversification. And all three of these investments provide investors with a recurring monthly payout.
Given an initial $30,000 to invest in a TFSA, here’s how I would spread that investment out to generate over $110 every month.
Prospective investors who aren’t ready to draw on that income yet can reinvest those payments, allowing any eventual income to continue compounding until needed.
| Company | Recent Price | Total Invested | Number Of Shares | Dividend | Total Payout | Frequency |
| iShares S&P/TSX Composite High Dividend Index ETF | $40.31 | $6,500 | 161 | $1.35 | $217.35 | Monthly |
| Granite Real Estate | $89.05 | $11,000 | 123 | $3.55 | $436.65 | Monthly |
| RioCan Real Estate | $20.91 | $12,500 | 597 | $1.16 | $692.52 | Monthly |
| Total: | $1,346.52 | Monthly: | $112.21 |
