A Monthly Passive Income Stock I’d Put My Whole TFSA Contribution Into: Here’s My Take

Putting $7,000 into a TFSA won’t change your life today, but a high-yield monthly payer can start a compounding snowball.

Key Points
  • Make sure you actually have TFSA room, because overcontributions trigger a 1% monthly tax.
  • Atrium is a mortgage investment corporation that pays monthly income, and inside a TFSA that interest-like payout can be tax-free.
  • The 8% yield reflects real credit and real-estate risk, so use it as a slice of a diversified TFSA.

Seven thousand dollars doesn’t sound like life-changing money. Yet give it enough time inside a Tax-Free Savings Account (TFSA), and things get more interesting.

The 2026 TFSA dollar limit is $7,000. Someone with at least that much available contribution room could invest the entire amount and potentially start collecting nearly $50 every month without selling a share.

Then those payments can go straight back to work. That’s the appeal of monthly passive income. One payment isn’t going to replace a paycheque. Reinvest hundreds of them over a decade or two, tax-free, and suddenly this very boring little snowball has become substantially larger.

concept of real estate evaluation

Source: Getty Images

Check the room

The $7,000 annual TFSA limit doesn’t mean every Canadian automatically has exactly $7,000 available. Unused room carries forward, while withdrawals are generally added back as contribution room the following calendar year. Investors should check their own records before contributing because overcontributions can trigger a 1% monthly tax.

Once the room exists, however, investment growth, dividends, and withdrawals can generally remain tax-free inside a TFSA. That becomes particularly interesting with one type of income investment.

AI

Atrium Mortgage Investment Corporation (TSX: AI) is an alternative mortgage lender. Instead of owning apartments or office towers, Atrium lends money against Canadian real estate, primarily in major urban markets.

As a mortgage investment corporation (MIC), it distributes its taxable income to shareholders. Outside a registered account, those payments are generally treated as interest income rather than eligible Canadian dividends.

Inside a TFSA? That tax headache disappears. Atrium currently pays $0.08 per share every month, or $0.93 annually. At a recent price of $11.51, that produces a yield of roughly 8.1%. Here’s what putting the entire $7,000 annual TFSA contribution to work looks like. That works out to $47.12 per month.

COMPANYRECENT PRICENUMBER OF SHARESANNUAL DIVIDENDANNUAL TOTAL PAYOUTFREQUENCYTOTAL INVESTMENT
AI$11.51608$0.93$565.44Monthly$6,998.08

Not retirement money yet. Certainly more interesting than $1.92 sitting lonely in cash. Atrium also offers a dividend reinvestment plan, allowing Canadian shareholders to reinvest payments into additional shares at a 2% discount to market prices without commissions. That isn’t a forecast. It does show why I like reinvesting monthly dividend stocks long before the income is actually needed.

Considerations

Atrium isn’t risk-free, of course. Second-quarter earnings per share fell to $0.24 from $0.28 a year earlier, while the mortgage portfolio declined to $860 million as repayments exceeded new lending. Its allowance for credit losses also stood at $30.1 million.

Still, the portfolio remains relatively conservative for an alternative lender. About 96.9% of mortgages were first mortgages, with a weighted-average loan-to-value ratio of 62.5%.

There’s also a potential growth catalyst. Atrium opened an Alberta office this year, lending activity improved during the second quarter, and management expects its mortgage portfolio to exceed $900 million by year-end.

Bottom line

Would I put an entire TFSA into Atrium? No. Would I put this year’s entire $7,000 contribution into it if I already owned a diversified portfolio and wanted more monthly income? At roughly $11 per share and an 8% yield, I’d be comfortable letting those payments start buying next year’s income for me.

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.

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