Canadians: How to Make Over $50 a Week in Tax-Free Income

TFSA investors in Canada can gobble up big tax-free income by scooping up stocks like Keyera Corp. (TSX:KEY) in December.

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There are many ways to utilize a Tax-Free Savings Account (TFSA), which has emerged as a popular registered account since its inception in 2009. In late November, I’d discussed how $20,000 could net an investor over $115 a month in tax-free income by targeting specific stocks. Today, I want to look at how $40,000 that makes up nearly two-thirds of the maximum base contribution in a TFSA can net you what works out to $50 a week in tax-free income.

Bird Construction

Bird Construction is an Ontario-based company that operates as a contractor in the broader construction market. Shares have climbed 12.5% in 2019 as of close on December 5. The company released its third-quarter 2019 results on November 5.

Net income jumped to $6.8 million on construction revenue of $378.6 million compared to $4.4 million in the prior year on marginally higher revenues. Adjusted EBITDA increased to $14 million over $9 million in Q3 2018. Profit improved across all sectors in the quarter.

In our hypothetical, we would purchase 2,000 shares of Bird at its last closing price of $6.52 per share. With its current monthly dividend of $0.0325 per month, which represents a 5.9% yield, that would work out to $65 a month in tax-free income.

Keyera

Keyera (TSX:KEY) is a Calgary-based oil and gas producer. Its stock has climbed 29% in 2019 at the time of this writing. When we consider its strong dividend, Keyera has been a terrific hold so far this year.

In the third quarter, Keyera rose above expectations in nearly every financial metric. Adjusted earnings reached a record $269 million compared to $160 million in Q3 2018. Distributable cash flow rose to $184 million,or $0.85 per share, over $127 million, or $0.61 per share, in the prior year. Keyera is moving into 2020 with a strong balance sheet and a payout ratio of 67% year to date.

Shares closed at $31.81 on December 5. Keyera currently boasts a monthly dividend of $0.16, representing a 6% yield. A purchase of 450 shares would net investors $72 a month in tax-free income in their TFSA.

Inter Pipeline

Inter Pipeline (TSX:IPL) is another Calgary-based company. It ranks as one of North America’s leading natural gas and NGL extraction businesses. Inter Pipeline stock has climbed 20.6% in 2019 as of close on December 5.

The company reported that total storage utilization rates rose to 92% in the third quarter of 2019 compared to 74% in Q3 2018. Net income hit $80 million in the quarter, and funds from operations totaled $204 million. It achieved a quarterly payout ratio of 87%.

Back to our hypothetical, we see that Inter Pipeline closed at $21.76 per share on December 5. On November 7, it announced a monthly cash dividend of $0.1425 per share. In this case, we can load up on 560 shares of Inter Pipeline stock in order to avoid going above the $40,000 threshold set at the beginning of this article. Investors would be able to snatch up $79.80 a month in tax-free income.

Working out the total we have purchased, our TFSA would generate $216.80 a month in dividend payments. That works out to $54 a week in tax-free income.

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This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

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