Canadians can turn the TFSA (Tax-Free Savings Account) into a source of monthly passive income by owning quality dividend stocks that offer a monthly payout.
In this article, I have identified two high-yield dividend stocks that should be on top of your monthly income watchlist in November 2026.
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How much do you need in a TFSA to earn $400 a month tax-free?
Canadians seeking to earn $400 a month in tax-free dividend income will need to invest around $120,000 at a 4% yield. If the dividend yield rises to 6%, the investment falls to $80,000. Basically, the dividend yield and share price of a company have an inverse relationship.
In 2026, the TFSA contribution room has increased to $7,000, bringing the maximum cumulative contribution room to $109,000.
Notably, dividends or capital gains earned by qualified investments in a TFSA are exempt from Canada Revenue Agency taxes.
Should you own this 13% dividend stock in the TFSA?
Timbercreek Financial (TSX: TF) is a Canada-based non-bank commercial real estate lender that provides customized debt financing solutions to commercial real estate investors. The company focuses on structured bridge and transitional loans secured by income-producing commercial properties, with an emphasis on multi-family residential assets across Canada.
It aims to generate stable monthly dividend income and preserve capital for shareholders. In November 2026, it offers an annual dividend of $0.69 per share, which translates to a yield of over 13%.
On its July 30 earnings call, the company reported distributable income of 14.6 million, or $0.18, indicating a payout ratio of 97%.
Here’s why the loan book looks conservative.
- Most of Timbercreek’s loans sit first in line. About 94% are first mortgages, so Timbercreek gets repaid before other lenders.
- Roughly 81% are properties that bring in rent, such as apartment buildings.
- On average, Timbercreek lent 68.3% of each property’s value.
Stage 3 balances, which are defined as loans under stress, have fallen by 51% over the last two quarters. However, about 20% of the portfolio is still in Stage 2 or Stage 3, well above the usual 7% to 10%. Resolving those loans has a cost, and higher credit loss provisions cut net income to $7.8 million in Q2 from $12.4 million in the prior quarter.
Why Diversified Royalty’s 8% yield looks steadier
Diversified Royalty (TSX: DIV) is a multi-royalty corporation and pays an annual dividend of $0.29 per share, or a yield of almost 8%.
In Q3, it reported revenue of $31.5 million, up from $18.3 million in the year-ago period. Its combined contribution rose to $24.9 million from $19.6 million, while distributable cash climbed 21.9% to $15.5 million.
The payout ratio improved to 86.9% from 91.9%, which leaves more room compared to Timbercreek.
In July, the company sold about 12.3 million shares at $4.66 and used the money to fund the $38.5 million acquisition loan for the Mr. Lube + Tires franchisor business.
What a $400 a month TFSA portfolio looks like
You need to invest about $45,200 split evenly between the two TSX dividend stocks to earn $400 a month in passive income.
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY |
| Timbercreek Financial | $5.20 | 4,346 | $0.0575 | $250 | Monthly |
| Diversified Royalty | $3.62 | 6,243 | $0.02375 | $150 | Monthly |
Over the last five years, a similar investment in the two monthly dividend stocks would be worth around $62,000 today, after adjusting for dividend reinvestments.
In this period, Timbercreek has delivered negative returns while Diversified Royalty has almost doubled.
We can see that investing in a dividend stock with a lower payout and a sustainable yield is a much better option than chasing high-yield stocks.
