TPZ:CC - TFSA Passive Income: How Much to Invest to Earn $250/Month

2024-04-12 20:15:00 ET

The Tax-Free Savings Account (TFSA) is a great place to earn investment passive income because you don’t have to pay any tax on the dividends, distributions, interest, or capital gains you earn. You can elevate your passive income returns by 10 to 20% by putting your dividend stocks into your TFSA.

In fact, with $60,000 of capital you can earn an average of $250 month (or $3,000 per year) from dividends. Here’s a diversified four stock portfolio that could help you hit that passive income target.

A nice safe yield for a TFSA

Pembina Pipeline ( TSX:PPL ) is a great stock if you just want a steady stream of income. This company is so resilient, it was able to maintain its dividend even when oil prices temporarily went negative in 2020.

Fortunately, that isn’t likely to happen again. Even if it did, Pembina would be well equipped. Over 85% of its earnings and cash flows are from contracted tolling agreements. The remainder comes from the spread it makes on reselling its processed commodities.

The company has an industry-leading balance sheet. It provides significant optionality to invest in growth opportunities .

Pembina stock yields 5.6%. A $15,000 investment in Pembina would buy 312 shares. That would earn $208 per quarter or average out to $69.42 of monthly TFSA income.

A real estate income stream

Another stock that is a good sturdy bet for TFSA income is Dream Industrial Real Estate Investment Trust ( TSX:DIR.UN ). This REIT is one of Canada’s largest industrial property landlords.

Industrial has been one of the most resilient real estate asset classes. Dream has a strong portfolio of centrally located warehouses that cater to distribution, logistics, manufacturing, and e-commerce tenants.

The REIT’s average rental rates remain significantly below market across its portfolio. As a result, it should naturally see strong rental rate growth over the coming years.

Dream stock yields 5.3%. You could buy 1,167 units of Dream with $15,000 of TFSA cash. That would earn $68.08 every single month.

A royalty stream for a TFSA

Topaz Energy ( TSX:TPZ ) is a very under-the-radar stock that is a nice fit for a TFSA. It is an energy infrastructure and royalty company. Basically, it earns a contracted flow of income from some crucial natural gas assets and a stream of royalties from land that it holds mineral rights to.

This is a nice stock because its assets are located in the heart of some very busy oil and natural gas plays in Western Canada. The company has a very lean operating structure. It generates a lot of cash, so as it grows, it can also regularly increase its dividend.

Consider that $15,000 of TFSA cash would buy 657 Topaz shares. That would earn $210.24 of quarterly dividends, or $70.08 averaged monthly.

A solid bank stock

Royal Bank of Canada ( TSX:RY ) is a solid Canadian stock to buy for long-term stable income. This bank has the top retail and commercial franchise in the country.

Royal is the largest bank in Canada, and it has been able to take market share even through a weaker economy. For a solid name that has consistently increased its dividend and delivered good returns, Royal is a great stock.

It yields 4% today. An investment of $15,000 could buy 109 Royal shares. That would earn $150.42 per quarter of TFSA income, or $50.14 averaged out monthly.

The post TFSA Passive Income: How Much to Invest to Earn $250/Month appeared first on The Motley Fool Canada .

Fool contributor Robin Brown has no position in any of the stocks mentioned. The Motley Fool recommends Dream Industrial Real Estate Investment Trust, Pembina Pipeline, and Topaz Energy. The Motley Fool has a disclosure policy .

2024