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TFSA: Invest $10,000 in These 4 Stocks and Get Over $400 of Passive Income

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Image source: Getty Images

Written by Robin Brown at The Motley Fool Canada

If you are keen for some passive income, you might as well earn it tax-free. When you invest inside of a Tax-Free Savings Account (TFSA), you don’t need to report any income and you don’t need to pay any income (that includes interest, dividends, and capital gains).

The tax saved by investing in the TFSA can really add up quickly. If you want to maximize returns, it is an excellent place to earn income. Want to deploy $10,000 for some easy and reliable passive income? Here are four diverse stocks that could collectively earn you $429 per annum.

A utility stock with a midstream business

AltaGas (TSX:ALA) offers an interesting combination of two businesses. Fifty-five percent of its business comes from a gas utilities business in the U.S. While 45% comes from a midstream and gas processing operation that spans across Western Canada.

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This is an intriguing mix because the regulated gas utility provides stability that largely supports its dividend. However, it also provides industry-leading mid-to-high single-digit growth.

The midstream business is more cyclical and volatile. However, when energy demand and pricing rise, it can generate exceptional amounts of excess cash.

AltaGas stock yields 4%. The company has recently been growing its dividend annually by a high single-digit rate. Thus, $2,500 put into AltaGas stock would earn $25.29 of quarterly passive income, or $101.15 annually tax-free.

A top Canadian financial stock for passive income

National Bank of Canada (TSX:NA) is one of the best performing banks in Canada. Over the past five years, investors would have earned a 117% total return (with dividends reinvested).

While National is only the sixth largest bank in Canada, it has focused on low-risk markets (like Quebec), diversified products, and smart capital allocation. The bank has a good balance sheet and earns a sector-leading return on equity.

Likewise, National has delivered sector-leading dividend per share growth of 8.6% compounded annually. It has a dividend yield of 3.8%. A $2,500 investment in National would earn $23.32 quarterly, or $93.28 annually.

A REIT for monthly income

Another passive income stock for a TFSA is First Capital Real Estate Investment Trust (TSX:FCR.UN). It owns one of the largest portfolios of urban retail and grocery-anchored properties. Its portfolio is attractive due to the essential nature of many of its tenants (grocery, pharmacy, hardware, and banking).

Its properties are well-located in the heart of cities. Consequently, it has been enjoying mid-to-high single-digit rental rate growth across its properties. The REIT has a considerable land and asset footprint that could be developed. This is hardly factored into the stock price.

Right now, First Cap stock yields 5.7%. A $2,500 TFSA investment would earn $11.88 monthly, or $142.56 annualized.

A tech stock for passive income

Enghouse Systems (TSX:ENGH) is an interesting bet for income and a potential turnaround story. The company provides communication and asset management software around the globe.

Enghouse had a surge in demand during COVID-19 and then a decline just as rapid. Competition has been fierce and that has slowed growth in Enghouse’s core markets.

Fortunately, the company generates a tonne of excess cash, and it has been using that to make tuck-in acquisitions. It has over $250 million of net cash on its balance sheet, so it is primed for a big acquisition.

Until that happens, Enghouse has an attractive 3.5% dividend yield. A $2,500 investment in Enghouse would earn $21.58 quarterly, or $86.32 annualized.

COMPANY

RECENT PRICE

NUMBER OF SHARES

DIVIDEND

TOTAL PAYOUT

FREQUENCY

AltaGas

$29.28

85

$0.2975

$25.29

Quarterly

National Bank of Canada

$111

22

$1.06

$23.32

Quarterly

First Capital REIT

$15.12

165

$0.072

$11.88

Monthly

Enghouse Systems

$29.88

83

$0.26

$21.58

Quarterly

The post TFSA: Invest $10,000 in These 4 Stocks and Get Over $400 of Passive Income appeared first on The Motley Fool Canada.

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Fool contributor Robin Brown has positions in Enghouse Systems. The Motley Fool has positions in and recommends Enghouse Systems. The Motley Fool recommends First Capital Real Estate Investment Trust. The Motley Fool has a disclosure policy.

2024