Home » Investing » Dividend Stocks » TFSA Investors: Buy These 4 Canadian Stocks and Earn Passive Income of Over $350/Month
These four Canadian stocks are excellent buys for income-seeking investors, given their steady cash flows, strong financial position, and high growth prospects.
About
Latest Posts
Rajiv Nanjapla
Rajiv Nanjapla has been with Motley Fool Canada since July 2020. He has over eight years of experience in analyzing financial statements and writing financial research reports. His area of interest includes cannabis, retail, technology, and energy. He also holds a post-graduate diploma in finance and operations.
A Tax-Free Savings Account (TFSA) allows Canadian citizens to earn tax-free returns on a specified amount called a contribution room. For this year, the CRA (Canada Revenue Agency) has fixed the contribution room to $6,000. However, the cumulative contribution stands at $75,500. By investing this amount in stocks that pay dividends above 5.6% yield, you can earn a passive income of $350 per month. So, if you are ready to invest, here are four Canadian stocks that pay dividends above 5.6%.
Enbridge
First on my list is Enbridge (TSX:ENB)(NYSE:ENB). The midstream energy infrastructure company has been consistently paying dividends for the last 66 years. It has also raised its dividends for the last 26 straight years at a CAGR of over 10%. Its low-risk, regulated business model and a diverse revenue stream of 40 assets deliver stable cash flows, permitting the company to raise its dividends consistently. The company’s forward dividend yield currently stands at 7.1%.
Meanwhile, Enbridge’s management has planned to invest around $17 billion from 2021 to 2023, expanding its asset base and boosting its financials. Further, the pickup in energy demand could increase the throughput of its mainline division, supporting its financial growth. Amid these factors, the company’s management expects its distributable cash flow per share to grow at a rate of 5-7% through 2023. So, I believe the company is well positioned to continue raising its dividends in the coming years.
Pembina Pipeline
Supported by its integrated assets, Pembina Pipeline(TSX:PPL)(NYSE:PBA) offers a full spectrum of midstream and marketing services to the energy industry. The company earns around 94% of its adjusted EBITDA from fee-based or take-or-pay contracts and regulated assets, delivering stability to its earnings and cash flows. These steady cash flows have allowed the company to raise its dividends at a CAGR of 4.9% over the last 10 years. Currently, the company pays monthly dividends of $0.21 per share, representing a forward dividend yield of 6.4%.
Meanwhile, the recovery in oil demand and prices could improve Pembina Pipeline’s margins, boosting its cash flows. Meanwhile, the management expects its adjusted EBITDA for this year to come in the range of $3.2-$3.4 billion. So, Pembina Pipeline’s dividends are safe.
NorthWest Healthcare
Third on my list is NorthWest Healthcare(TSX:NWH.UN), which acquires and manages healthcare properties across seven countries. Given its highly defensive and diversified asset base, the company enjoys high occupancy and collection rate. Its long-term contracts, government-backed tenants, and inflation-indexed rent generates steady cash flows, allowing the company to pay monthly dividends. Currently, its forward dividend yield stands at 6%.
NorthWest Healthcare is looking at disposing of its joint venture in the United Kingdom and deleveraging its balance sheet, which could further strengthen its financial position. Meanwhile, the company is also looking at expanding its geographical footprint in key markets, such as the United States and Western Europe. These expansions could bolster the company’s earnings and cash flows.
BCE
My final pick would be BCE (TSX:BCE)(NYSE:BCE), which has a long history of paying dividends. The telecom company has announced dividends of $3.50 per share for this year, with its forward dividend yield standing at 5.9%. Amid digitization and increased remote working and learnings, the demand for telecommunication services could rise in the coming years.
Meanwhile, BCE’s management is investing in expanding its 5G coverage and fiber and WHI connections to capture the expanding addressable market. These investments could boost the company’s earnings and cash flows. Additionally, its financial position looks healthy, with its liquidity standing at $6.5 billion at the end of the March-ending quarter. Given its healthy growth prospects and steady cash flows, I believe BCE would be an excellent buy for income-seeking investors.
The TFSA (tax-free savings account) allows investors to earn tax-free returns, including capital gains and dividends, on a specified amount called contribution room. For this year, the contribution room stands at $7,000, with its cumulative value at $95,000.
“By opening a brokerage account, you can take your initial $1,000 and invest it in the appropriate mix of low-cost cash, fixed-income and equity ETFs that best suit your needs and risk profile,” said Nicholas Gerber, CEO at Marygold & Co., a global holding company.
You pay no tax on any investment income you may earn in your TFSA and you can hold a variety of qualified investments, including cash, stocks, guaranteed investment certificates and mutual funds. The higher the return potential on your investments, the faster your savings may grow, tax-free.
Depending on the type of investment held in your TFSA, you can generally withdraw any amount from the TFSA at any time. Withdrawing funds from your TFSA does not reduce the total amount of contributions you have already made for the year.
To open a TFSA , you must do both of the following:
Contact your financial institution, credit union, or insurance company (issuer).
Provide the issuer with your SIN and date of birth so the issuer can register your qualifying arrangement as a TFSA . Your issuer could ask for supporting documents.
But you could also purchase a property, renovate and resell it. Or if you're looking to invest $100,000 for passive income, you might buy real estate and rent it out. While rental income is considered passive income, being a landlord often requires considerable work, which can make it feel like a more active endeavor.
A stock portfolio focused on dividends can generate $1,000 per month or more in perpetual passive income, Mircea Iosif wrote on Medium. “For example, at a 4% dividend yield, you would need a portfolio worth $300,000.
Long-term investors who build up a portfolio of dividend-paying stocks or funds have one of the best ways to earn passive income. Investing in dividend-paying stocks is a passive income idea with both cash flow and capital growth potential.
Yes, you can lose money on a TFSA, but it is easy to avoid losing your money. Typically, people who lose their money on a Tax-Free Savings Account are people who are using it for more volatile investments or people who are over-contributing.
The Tax-Free Savings Account (TFSA) program began in 2009. It is a way for individuals who are 18 and older and who have a valid social insurance number (SIN) to set money aside tax-free throughout their lifetime. Contributions to a TFSA are not deductible for income tax purposes.
Most TFSA holders have no tax payable related to their TFSA investments, and no TFSA tax return has to be filed. However, when TFSA taxes are applicable for a year, Form RC243, Tax-Free Savings Account (TFSA) Return, must be filed by June 30, of the following year. Any tax owing must also be paid by that date.
A TFSA allows you to set money aside in eligible investments and watch those savings grow tax-free throughout your lifetime. Interest, dividends, and capital gains earned in a TFSA are tax-free for life.
The main difference with a TFSA is that although you don't get a tax break when you contribute, you would not pay any capital gains tax to the Canada Revenue Agency (CRA) when money is withdrawn. Despite the name, tax-free savings accounts do more than what savings accounts can do.
Passive income includes regular earnings from a source other than an employer or contractor. The Internal Revenue Service (IRS) says passive income can come from two sources: rental property or a business in which one does not actively participate, such as being paid book royalties or stock dividends.
Do I have to pay income tax on my TFSA withdrawals in Canada? No, you don't have to pay income tax on the amounts you withdraw. As TFSA withdrawals don't count as taxable income, provided the income is from eligible products and investments.
Address: Suite 237 56046 Walsh Coves, West Enid, VT 46557
Phone: +59115435987187
Job: Education Supervisor
Hobby: Genealogy, Stone skipping, Skydiving, Nordic skating, Couponing, Coloring, Gardening
Introduction: My name is Ms. Lucile Johns, I am a successful, friendly, friendly, homely, adventurous, handsome, delightful person who loves writing and wants to share my knowledge and understanding with you.
We notice you're using an ad blocker
Without advertising income, we can't keep making this site awesome for you.
