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Passive Income: How to Make $620 Per Month TAX FREE

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Image source: Getty Images

Written by Ambrose O'Callaghan at The Motley Fool Canada

The establishment of a sizable passive-income cash stream should always be a goal that investors set for themselves. Passive income does not come from regular employment, rather it is unearned income that is generated with minimal labour. Rental income, royalties from a novel or television series, and the flipping of retail products are all examples of passive income.

Today, I want to explore how you can make over $600 per month tax free by targeting the right equities in your Tax-Free Savings Account (TFSA). In this hypothetical, we are going to be using all the cumulative room that is available in a 2023 TFSA: $88,000. Let’s jump in!

This green energy stock is the first target for our passive-income portfolio

TransAlta Renewables (TSX:RNW) is a Calgary-based company that owns, develops, and operates renewable and natural gas power-generation facilities and other infrastructure assets in North America and Australia. Shares of this dividend stock have climbed 5% month over month as of close on April 18. The stock is now up 10% so far in 2023.

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Investors got to see this company’s final batch of fiscal 2022 earnings on February 23. The company achieved adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) growth of 5% to $487 million for the full year. Meanwhile, it reported cash flow from operating activities of $257 million.

This stock closed at $12.55 per share on April 18. For our hypothetical, we can snatch up 2,335 shares of TransAlta Renewables for a purchase price of $29,304.25. TransAlta offers a monthly dividend of $0.078 per share. That represents a very strong 7.4% yield. Indeed, this purchase will allow us to generate tax-free passive income of $182.13 going forward.

Here’s an undervalued REIT that offers big income right now

Northwest Healthcare REIT (TSX:NWH.UN) is a real estate investment trust (REIT) that is based in Toronto and owns and operates a global portfolio of high-quality healthcare real estate. This stock has moved up marginally over the past month. Its shares have dropped 11% in the year-to-date period.

In the fourth quarter (Q4) of 2022, this company posted revenue growth of 23% to $118 million. Moreover, it delivered adjusted funds from operations (AFFO) per unit of $0.17. For the full year, AFFO rose to $0.73 per unit.

Northwest REIT closed at $8.38 on Friday, April 18. We can look to purchase 3,500 shares of Northwest REIT for a total of $29,330. This REIT last paid out a monthly distribution of $0.067 per share, which represents a monster 9.5% yield. TFSA investors should rejoice, as this means we can now generate monthly passive income of $234.50.

One more passive-income beast that will help you reach the $620/month goal

Sienna Senior Living (TSX:SIA) is the third dividend stock I’d target to round out our TFSA passive-income portfolio. This Markham-based company provides senior living and long-term-care (LTC) services in Canada. Its shares have dipped marginally so far in 2023. The stock is down 26% year over year.

Shares of Sienna Senior Living closed at $11.01 on Friday, April 18. For our hypothetical, we can buy 2,665 shares of Sienna for a purchase price of $29,341.65. This stock offers a monthly dividend of $0.078 per share, representing a super 8.5% yield. The investment allows us to make tax-free monthly passive income of $207.87.

Conclusion

COMPANY

RECENT PRICE

NUMBER OF SHARES

DIVIDEND

TOTAL PAYOUT

FREQUENCY

RNW

$12.55

2,335

$0.078

$182.13

Monthly

NWH.UN

$8.38

3,500

$0.067

$234.50

Monthly

SIA

$11.01

2,665

$0.078

$207.87

Monthly

These investments in our TFSA will now allow us to make $624.50 in monthly passive income going forward. That is a nice chunk of change to rely on in a shaky market.

The post Passive Income: How to Make $620 Per Month TAX FREE appeared first on The Motley Fool Canada.

Should You Invest $1,000 In NorthWest Healthcare Properties?

Before you consider NorthWest Healthcare Properties, you'll want to hear this.

Our market-beating analyst team just revealed what they believe are the 5 best stocks for investors to buy in April 2023... and NorthWest Healthcare Properties wasn't on the list.

The online investing service they've run for nearly a decade, Motley Fool Stock Advisor Canada, is beating the TSX by 21 percentage points. And right now, they think there are 5 stocks that are better buys.

See the 5 Stocks * Returns as of 4/18/23

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Fool contributor Ambrose O'Callaghan has no position in any of the stocks mentioned. The Motley Fool recommends NorthWest Healthcare Properties Real Estate Investment Trust. The Motley Fool has a disclosure policy.

2023