Passive income is a form of cash generation that is earned without employment or contract income. Moreover, it does not require active labour to receive money in exchange for a service that is performed. Some forms of passive income include rental income, money generated from a published work like a novel, or investment income from a dividend stock. That last example is what we will be focusing on in this piece.
Unlike other passive-income avenues, you can pursue tax-free income generation through a Tax-Free Savings Account (TFSA). Today, I want to explore how you can generate $270 per month in passive income. In this piece, we will be utilizing half of our cumulative contribution room of $44,000. Let’s jump in.
Here’s why Extendicare can jumpstart your passive-income portfolio
Extendicare (TSX:EXE) is the first monthly dividend stock I’d target for our TFSA today. This Markham-based company provides care and services for seniors across Canada. Shares of this dividend stock have dropped 10% month over month as of close on Wednesday, August 30. That has pushed the stock into negative territory so far in 2023.
In the second quarter (Q2) of fiscal 2023, Extendicare posted revenue growth of 3.7% to $307 million. Meanwhile, revenue grew 5% to $632 million in the first six months of fiscal 2023.
This dividend stock closed at $6.44 per share on Wednesday, August 30. For our hypothetical, we can snatch up 2,000 shares of Extendicare for a total price of $12,880. The stock currently offers a monthly distribution of $0.04 per share. That represents a very tasty 7.4% yield. This investment means we can now generate monthly passive income of $80 in our TFSA.
Why its time to bet on this hotel REIT in 2023
American Hotel Income Properties REIT (TSX:HOT.UN) is a Vancouver-based real estate investment trust (REIT) that was formed to invest in hotel real estate properties across the United States. This REIT inched down by nearly a full percentage point during the trading session on August 30. Shares of this REIT have dropped sharply in the year-over-year period, as we can see by the interactive price chart below.
Shares of this REIT closed at $2.23 per share on August 30. We can look to snag 8,900 shares of the American Hotel REIT for a purchase price of $19,847. The REIT last paid out a monthly dividend of $0.015 per share, which represents a monster 10% yield. Our investment in this REIT can now churn out monthly passive income of $133.50 completely tax free.
One more monthly dividend stock that can help our passive-income push
First National (TSX:FN) is the third and final monthly dividend stock I’d look to snatch up in our passive-income-focused TFSA. This Toronto-based company originates, underwrites, and services commercial and residential mortgages in Canada. Shares of First National have inched up marginally in the year-to-date period at the time of this writing.
This dividend stock closed at $37.55 per share on August 30. For our final TFSA purchase, we can acquire 300 shares of First National for $11,265. First National stock last paid out a monthly dividend of $0.20 per share, representing a very strong 6.3% yield. We can now make monthly passive income of $60 in our TFSA.
Conclusion
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY |
| EXE | $6.44 | 2,000 | $0.04 | $80 | Monthly |
| HOT.UN | $2.23 | 8,900 | $0.015 | $133.50 | Monthly |
| FN | $37.55 | 300 | $0.20 | $60 | Monthly |
These investments will allow us to churn out monthly passive income of $273.50 in our TFSA. That works out to an annual tax-free payout of $3,282.
