The Tax-Free Savings Account (TFSA) can be an income-generating machine. When you don’t pay any tax, all your income (dividends, gains, and interest) stays with you. By paying no tax on your income, you can increase your annual gains by as much as 10-20% (depending on your tax bracket).
The TFSA is the most preferred registered account to utilize because there is no tax on your income and no tax when you withdraw. It provides the most tax-free flexibility for investors. It can be the ideal place to build an income engine. In fact, everyday investors could earn an average of $300 per month inside their TFSA.
Here’s a four-stock mini-portfolio that could help you get there with as little as $80,000 invested.
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Dream Industrial: A top high-yielding REIT
The first stock you could buy with $20,000 in your TFSA is Dream Industrial Real Estate Investment Trust (TSX:DIR.UN). With a stock price of $12.92, you could buy 1,547 units. With a 5.4% yield, you would earn $90.24 of monthly income.
Industrial real estate has been one of the most resilient asset classes in recent years. Solid demand continues to fuel good double-digit rental rate growth. Dream has well-located, urban properties that cater to a wide mix of tenants.
Occupancy is rising, and so are cash flows. This is a well-managed business that also happens to trade at a big discount to its private market value. It’s a decent time to add this attractive dividend stock.
Pembina: A top infrastructure play
Another stock to buy with $20,000 in your TFSA is Pembina Pipeline (TSX:PPL). At a stock price of $60.76, you could buy 329 shares. With a yield of 4.67%, you would earn $233.59 quarterly or $77.86 average monthly income.
Pembina is a leading energy infrastructure provider to western Canadian energy producers. Whether it be powering data centres, connecting new pipelines to producers, or constructing one of Canada’s LNG export terminals, Pembina has a long line of growth ahead.
It has one of the best balance sheets in its sector. It has been growing its dividend annually for the past few years, so investors get that upside income.
Topaz: A royalty stream for income
Topaz Energy (TSX:TPZ) is another TFSA stock to buy with $20,000. With a stock price of $31.29, you could buy 639 shares. With a yield of 4.35%, your investment would earn $217.26 quarterly, or $72.42 averaged monthly
This is a great stock in this environment. Energy prices are set to rise, and Canadian energy producers could start to open the taps. More production means more royalties for Topaz.
This is a very well-run company that earns high margins and steady cash flows. It has been raising its dividend regularly, so there is certainly more income to come from this stock.
Propel: A promising fintech for income
The last stock to buy with $20,000 of TFSA cash is Propel Holdings (TSX:PRL). With a stock price of $20.43, you could buy 978 shares. With a 4% yield, your investment would earn $198.045 quarterly or $66.01 average monthly.
This is one of the most volatile stocks of this mix. Propel provides loans to the non-prime market, which is a riskier segment. The company has a great record of growth.
While its growth rate is moderating, it still has plenty of opportunities ahead through its recent U.K. acquisition, its lending-as-a-service platform, and new banking services. If you want growth and income, this is the stock to buy today.
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY |
| Dream Industrial REIT | $12.92 | 1,547 | $0.0583 | $90.24 | Monthly |
| Pembina Pipeline | $60.76 | 329 | $0.71 | $233.59 | Quarterly |
| Topaz Energy | $31.29 | 639 | $0.34 | $217.26 | Quarterly |
| Propel Holdings | $20.43 | 978 | $0.2025 | $198.045 | Quarterly |