Canada Markets closed
  • S&P/TSX

    20,197.61
    +15.69 (+0.08%)
     
  • S&P 500

    3,901.36
    +0.57 (+0.01%)
     
  • DOW

    31,261.90
    +8.77 (+0.03%)
     
  • CAD/USD

    0.7790
    -0.0009 (-0.1207%)
     
  • CRUDE OIL

    110.35
    +0.46 (+0.42%)
     
  • BTC-CAD

    37,850.56
    +17.82 (+0.05%)
     
  • CMC Crypto 200

    650.34
    -23.03 (-3.42%)
     
  • GOLD FUTURES

    1,845.10
    +3.90 (+0.21%)
     
  • RUSSELL 2000

    1,773.27
    -2.96 (-0.17%)
     
  • 10-Yr Bond

    2.7870
    -0.0680 (-2.38%)
     
  • NASDAQ

    11,354.62
    -33.88 (-0.30%)
     
  • VOLATILITY

    29.43
    +0.08 (+0.27%)
     
  • FTSE

    7,389.98
    +87.24 (+1.19%)
     
  • NIKKEI 225

    26,739.03
    +336.19 (+1.27%)
     
  • CAD/EUR

    0.7372
    +0.0007 (+0.10%)
     

TFSA Couples: How to Make Over $850/Month in Tax-Free Passive Income

  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
·4 min read
In this article:
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
Happy couple being attended by office worker at office
Happy couple being attended by office worker at office

Written by Aditya Raghunath at The Motley Fool Canada

The TFSA, or Tax-Free Savings Account, was introduced back in 2009 to help Canadians increase their savings. The TFSA is a registered account where you can hold investments across asset classes that include stocks, bonds, and mutual funds.

While contributions towards the TFSA are not tax deductible, any withdrawal in the form of capital gains, interests, or dividends is exempt from Canada Revenue Agency taxes. The maximum contribution limit towards the TFSA is $81,500, and for married couples, it doubles to $161,000.

As withdrawals are tax free, the TFSA is ideal to hold a basket of dividend stocks, where you can benefit from a steady stream of recurring income as well as long-term capital gains. However, investors should understand that dividend payments are not a guarantee, and it’s important to identify companies with robust fundamentals and the ability to generate cash flows across business cycles.

With a contribution room of $161,000, a stock has to offer investors a dividend yield of more than 6.4%, which will result in monthly payouts of $850.

Pembina Pipeline

A Canadian energy heavyweight valued at a market cap of $22 billion and an enterprise value of $33.6 billion, Pembina Pipeline (TSX:PPL)(NYSE:PBA) has a forward yield of 6.27%. Pembina successfully endured an extremely difficult period during COVID-19, but the current commodity environment is ideal for the company. In fact, the rising prices of crude oil will drive pipeline volume higher for Pembina’s existing assets.

The company reported adjusted EBITDA of $850 million in Q3 of 2021, which was 7% higher compared to the year-ago period. Its marketing business increased EBITDA by $75 million in Q3 and was a key driver of bottom-line growth. Pembina’s marketing business continues to benefit from higher margins on natural gas liquids (NGL) and crude oil sales as well as the positive impact of higher NGL volumes. Its earnings in Q3 stood at $588 million, which was 82% higher compared to the year-ago period.

Enbridge

One of the largest companies in Canada, Enbridge (TSX:ENB)(NYSE:ENB) offers investors a forward yield of 6.53%. The energy giant recently increased its dividends by 3%. In fact, in the last 27 years, Enbridge has increased dividend payouts at an annual rate of 10% showcasing the resiliency of its underlying business.

In addition to dividend increases, Enbridge continues to improve shareholder wealth via buybacks. It also continues to invest in capital expenditures, which will expand its base of cash-generating assets and support dividend increases in the future. Additionally, Enbridge is investing heavily to increase revenue from renewable energy operations, which accounts for 4% of total cash flows right now. Enbridge maintained it will allocate one-third of its capex budget towards building its renewable energy portfolio.

The cash flows of both Enbridge and Pembina Pipeline are backed by long-term contracts, making them relatively immune to fluctuations in commodity prices. This model also enabled the companies to maintain dividend payments amid COVID-19.

The Foolish takeaway

An equal investment of $81,500 in each of the two stocks will help you generate $858 in monthly dividends and more than $10,500 in annual dividends. However, it does not make sense to allocate a large portion of your capital in just two stocks. You need to identify similar companies with tasty dividend yields and a strong business model that can support consistent dividend increases over time.

The post TFSA Couples: How to Make Over $850/Month in Tax-Free Passive Income appeared first on The Motley Fool Canada.

Should You Invest $1,000 In Enbridge Inc. (usa)?

Before you consider Enbridge Inc. (usa), we think you’ll want to hear this.

Our S&P/TSX market doubling Stock Advisor Canada team just released their top 10 starter stocks for 2022 that we believe could be a springboard for any portfolio.

Want to see if Enbridge Inc. (usa) made our list? Get started with Stock Advisor Canada today to receive all 10 of our starter stocks, a fully stocked treasure trove of industry reports, two brand-new stock recommendations every month, and much more.

Click Here to Learn More About Stock Advisor Canada Today * Returns as of 1/18/22

More reading

Fool contributor Aditya Raghunath owns ENBRIDGE INC. The Motley Fool recommends Enbridge and PEMBINA PIPELINE CORPORATION.

2022

Our goal is to create a safe and engaging place for users to connect over interests and passions. In order to improve our community experience, we are temporarily suspending article commenting