The Tax-Free Savings Account (TFSA) offers Canadians a unique opportunity to grow investments without the burden of taxes.
You can generate a steady stream of tax-free income by strategically selecting dividend-paying stocks. Here’s how you can achieve $191.75 per month.
Understanding the TFSA Advantage
Introduced in 2009, the TFSA allows Canadians to contribute up to a certain limit annually, with all investment gains and withdrawals being tax-free. This makes it an ideal vehicle for building a passive income stream.
Selecting the Right Dividend Stocks
To generate consistent monthly income, investing in reliable dividend-paying stocks is essential. Companies with a history of stable and growing dividends are preferable, as they offer both income and potential capital appreciation.
Calculating the Investment Needed
Assuming an average annual dividend yield of 5%, you’d need to invest approximately $46,020 to achieve $191.75 per month ($2,301 annually). This calculation is based on the formula: Investment Amount = Desired Annual Income / Dividend Yield.
Diversifying Your Portfolio
Diversification reduces risk. Consider spreading your investment across various sectors such as utilities, banks, and telecommunications to ensure a balanced and resilient portfolio.
| Company Name | Stock Symbol | Sector | Dividend Yield (%) | Payout Frequency |
|---|---|---|---|---|
| Enbridge Inc. | ENB | Energy | 6.5 | Quarterly |
| Fortis Inc. | FTS | Utilities | 4.0 | Quarterly |
| BCE Inc. | BCE | Telecommunications | 5.7 | Quarterly |
| Bank of Nova Scotia | BNS | Financials | 6.0 | Quarterly |
Reinvesting Dividends for Growth
Reinvesting dividends can accelerate your portfolio’s growth through compounding. Many companies offer Dividend Reinvestment Plans (DRIPs) that automatically purchase additional shares with the dividends earned.
Monitoring and Adjusting Your Strategy
Regularly review your investments to ensure they align with your income goals. Stay informed about company performances, and be prepared to adjust your holdings as needed to maintain or increase your income stream.
By leveraging the benefits of a TFSA and investing in solid dividend-paying stocks, you can create a reliable, tax-free monthly income of $191.75.
This strategy provides financial stability and takes full advantage of the TFSA’s tax-sheltered environment.
FAQs
1. What is a TFSA?
A Tax-Free Savings Account (TFSA) is a registered account in Canada that allows for tax-free investment growth and withdrawals.
2. How much can I contribute to my TFSA annually?
The annual contribution limit varies each year. As of 2025, the cumulative contribution room for someone who has been eligible since 2009 is $102,000.
3. What types of investments can I hold in a TFSA?
You can hold various investments, including stocks, bonds, mutual funds, and ETFs, within a TFSA.
4. Are dividends earned in a TFSA taxable?
No, all dividends, interest, and capital gains earned within a TFSA are tax-free, even upon withdrawal.
5. Can I withdraw funds from my TFSA anytime?
Yes, you can withdraw funds at any time without penalties. Withdrawn amounts are added back to your contribution room in the following year.
