Have you ever wondered how much money you could earn in a TFSA with $100,000 invested?
It’s a pertinent question to ask now, with the lifetime available TFSA contribution room having topped $100,000 just recently.
With $100,000 invested in high-yield dividend stocks, you could easily generate $5,000 per year, or $416 per month. Indeed, many investors do just that, buying high-yield stocks and REITs with the aim of making as much dividend income as possible.
That’s one approach you could take. However, I’d personally aim a little lower in terms of my income goal. As anyone who has followed Canadian telcos in recent years will tell you, high-yield stocks are often unreliable, being subjected to dividend cuts. In extreme cases, companies even eliminate their dividends entirely. If you go hunting for high yield—especially if you are not careful about what you buy—you risk having that happen to you. On the other hand, if you acquire a defensive, highly diversified dividend portfolio, with a modest yield, you can get a satisfactory amount of monthly income that will likely grow over time. In this article, I’ll explore how I’d do that.

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Invest in dividend ETFs
If I had $100,000 to invest and were aiming for a specific amount of monthly TFSA income, I’d invest in dividend index exchange-traded funds (ETFs). Such ETFs reduce the risk of investments by diversifying broadly (spreading eggs across many baskets), resulting in higher risk-adjusted returns than you’d get with individual stocks. Studies show that over very long periods of time, index ETFs also produce higher returns than comparable stock-picking strategies, period, without even mentioning risk! So, a good monthly-paying dividend ETF would be a good choice for an income-hungry investor.
Take Vanguard FTSE Canadian High Yield ETF (TSX: VDY), for example. It’s an index ETF built on the FTSE Canadian High Yield Index, a list of about 60 high-yield stocks. The fund has a higher yield than the overall TSX, because it screens out low yield and non-dividend stocks. As a result, it yields 2.86%—about enough to bring in $238 per month in dividend income with a $100,000 position. If you hold all of your VDY shares in a TFSA, you pay no taxes on these dividends. If you were 18 or old in 2009, you have accumulated more than $100,000 worth of contribution room, so building such a position probably doable. So, VDY seems like a decent vehicle through which to generate monthly TFSA income.
Income potential
Having explored the basics of VDY, it’s now time for us to explore how much income you can get from it.
This is a function of VDY’s dividends and its price.
VDY’s most recent dividend was $0.1822. The amount has varied quite a bit in recent months, so we’ll just go with the most recent monthly amount to forecast the year-ahead annual dividends. Since VDY pays monthly, our estimate says the annual amount will be $2.186. The ETF currently costs $76.39. So, our projected one-year yield is 2.86%. With this yield, you can get $238 per month in passive income. Here’s the math on that:
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY |
| VDY ETF | $76.39 | 1,309 | $0.1822 per month ($2.186 per year) | $238.49 per month ($2.862 per year) | Monthly |
Foolish takeaway
As we’ve seen, the VDY ETF has a lot of things going for it: it holds 60 stocks, it has an above-average yield, and it has a monthly payout schedule. If I were looking to generate $238 worth of monthly income from a TFSA today, I’d consider an investment in VDY, without a doubt.