TFSA Passive Income: Earn $500/Month (2024)

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TFSA investors can secure a steady monthly income with these TSX stocks.

Investing in top dividend-paying stocks can help you start a recurring passive income stream. Moreover, utilizing a TFSA (Tax-Free Savings Account) amplifies your income by shielding dividends, interests, and capital gains from taxation.

Fortunately, the TSX offers several high-quality stocks, such as Fortis(TSX:FTS) and Enbridge (TSX:ENB), which have consistently paid and increased their dividends for decades. While Fortis and Enbridge are dependable investments for passive income, they offer quarterly payouts. Here, I’ll focus on Canadian stocks that provide monthly payouts instead.

By selecting dividend stocks that pay out monthly, TFSA investors can secure a steady income and better manage their cash flow. Additionally, TFSA investors can reinvest dividends more frequently, benefiting from compounding to achieve higher long-term returns.

With this context, here are two fundamentally strong stocks ideal for TFSA investors looking to generate a worry-free passive income of $500 per month.

SmartCentres Real Estate Investment

TFSA investors seeking monthly passive income could consider Canadianreal estate investment trusts (REITs). REITs are popular for their high dividend distribution ratio and monthly payouts, making them excellent investments for investors seeking regular monthly cash.

Among the top REITs on the TSX, SmartCentres Real Estate Investment Trust (TSX:SRU.UN) stands out due to its stable distributions and high yield. Its resilient real estate portfolio, diverse tenant base, and high occupancy rate position it well to generate solid net operating income (NOI), supporting its monthly payouts.

SmartCentres owns high-traffic centres, which see strong demand, enabling the REIT to quickly re-lease space and maintain high occupancy levels. Additionally, SmartCentres benefits from its high-quality tenants, including major retailers and banks, which provide stability to its cash flows and ensure high rent collection rates.

Looking ahead, SmartCentres is likely to benefit from high occupancy and tenant retention rates. Increased leasing interest, a significant undeveloped land bank, efforts to diversify its portfolio with mixed-use developments, and debt reduction will support future earnings and distributions. The REIT pays a monthly dividend of $0.154 per share, reflecting a yield of 7.8% (based on its closing price of $23.77 on August 7).

Whitecap Resources

For TFSA investors seeking a reliable and high-yield monthly dividend stock, Whitecap Resources (TSX:WCP) stock is a compelling choice. With its strong financials, consistent growth, and strategic focus on enhancing shareholder value, Whitecap Resources could be a solid addition to any dividend-focused investment portfolio.

This oil and gas company acquires, develops, and has holding interests in petroleum and natural gas assets. It pays a monthly dividend of $0.061 per share, translating into a high annualized yield of 7.4% at the current market price.

Whitecap Resources has a solid portfolio of low-decline, high-value reserves that drive its production volumes and funds flow per share. This financial strength supports the company’s consistent monthly payouts. Since 2010, Whitecap’s funds flow per share has grown at a compound annual growth rate (CAGR) of 13%. Simultaneously, its production per share has grown at a CAGR of 11%.

The momentum in its business has sustained in 2024, with the company reporting an impressive 15% increase in average production volumes. This uptick in production has fueled higher revenues and boosted funds flow, enabling Whitecap to enhance its shareholder value through dividends and share repurchases.

Whitecap Resources is well-positioned to sustain its growth momentum. The company is focused on increasing average production volumes and strengthening its balance sheet through divestitures and debt reduction. These efforts are expected to support continued stable monthly payouts and substantial cash returns to shareholders.

Bottom line

SmartCentres REIT and Whitecap Resources are dependable choices for TFSA investors who want to earn monthly passive income. By investing $40,000 in each of these stocks, TFSA investors can generate tax-free passive income of over $500/month, as illustrated in the table below.