Statistics Canada recently revealed that domestic inflation fell to 3.4% in the month of May. That was down from the 4.4% inflation rate reported in the month of April 2023. This represents the lowest inflation rate in two years. Despite this report, the Bank of Canada (BoC) is expected to push forward with yet another interest rate hike as soon as July.
Today, I want to explore a passive-income strategy, as Canadians continue to be squeezed. In this scenario, we are going to be using $30,000 in our Tax-Free Savings Account (TFSA) to build a passive-income portfolio. Let’s dive in.
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This energy stock is one of the best passive-income vehicles for investors
Freehold Royalties (TSX:FRU) is a Calgary-based company that is engaged in acquiring and managing royalty interest in the crude oil, natural gas, natural gas liquids, and potash properties in Western Canada and the United States. Shares of this energy stock have dropped 10% month over month as of close on Tuesday, June 27. Freehold stock has now plunged 11% in 2023.
In the first quarter of fiscal 2023, Freehold Royalties reported a 13% decline in royalty and other revenue to $76.6 million. Meanwhile, it posted total production growth of 8% to 14,724 barrels of oil equivalent per day (boe/d). Freehold reported funds from operations per diluted share of $0.39.
Shares of this energy stock closed at $13.28 on Tuesday, June 27. For our hypothetical, we can grab 750 shares of Freehold Royalties for a purchase price of $9,960. This stock offers a monthly distribution of $0.09 per share. That represents a super 8.1% yield. Our purchase will allow us to generate monthly passive income of $67.50 in our TFSA.
Why Extendicare is a great target for your TFSA today
Extendicare (TSX:EXE) is a Markham-based company that provides care and services for seniors in Canada. This stock has dropped 2.1% month-over-month at the time of this writing. Its shares have climbed 6.5% so far in 2023.
This company released its first-quarter (Q1) fiscal 2023 earnings on May 4. Extendicare posted adjusted earnings before interest, taxes, depreciation, and amortization of $31.0 million — up $10.8 million compared to Q1 of fiscal 2022. Meanwhile, it saw home healthcare volume growth reach an average daily volume of 26,043. That was up 6.1% compared to Q1 FY2022.
Extendicare stock closed at $6.96 per share on Tuesday, June 27. For our scenario, we can buy 1,400 shares for a total price of $9,744. This stock last paid out a monthly dividend of $0.04 per share, which represents a very tasty 6.9% yield. Our purchase will let us churn out tax-free monthly passive income of $56 going forward.
One more dividend stock that can round out our passive-income portfolio
TransAlta Renewables (TSX:RNW) is the third and final monthly dividend stock I’d target for our passive-income-oriented TFSA today. This Calgary-based company owns, develops, and operates renewable and natural gas power-generation facilities and other infrastructure assets in Canada, the United States, and Australia. Shares of TransAlta have dropped 2.3% so far in 2023.
Shares of this dividend stock closed at $11.10 on Tuesday, June 27. We can snatch up 927 shares of TransAlta for a purchase price of $10,289.70. This stock offers a monthly dividend of $0.078 per share, representing a fantastic 8.4% yield. We can now generate monthly passive income of $72.30 in our TFSA.
Conclusion
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY |
| FRU | $13.28 | 750 | $0.09 | $67.50 | Monthly |
| EXE | $6.96 | 1,400 | $0.04 | $56 | Monthly |
| RNW | $11.10 | 927 | $0.078 | $72.30 | Monthly |
These stock purchases in our TFSA will allow us to generate monthly passive income of $195.80 completely tax free. That works out to annual passive income of $2,349.60.
