Harness a TFSA to Earn $500/Month Tax-Free

Investors can earn a healthy passive income by investing in monthly-paying dividend stocks with high yields. Also, you can avoid paying taxes by making these investments through your TFSA (Tax-Free Savings Account). The cumulative contribution limit for a person who was 18 years and above in 2009 is $102,000. So, if you invest that amount in monthly-paying dividend stocks with a yield of above 6%, you can earn over $500 monthly.

Against this backdrop, let’s look at three monthly-paying dividend stocks that offer over a 6% yield.

SmartCentres Real Estate Investment Trust

SmartCentres Real Estate Investment Trust (TSX:SRU.UN) operates 196 mixed-use properties located across Canada, with 90% of the country’s population living within 10 kilometres of a SmartCentres property. It posted an impressive first-quarter performance earlier this month, leasing 178,408 square feet of existing space to raise its occupancy rate to 98.4%. The same properties’ NOI (net operating income) rose 4.1% compared to the previous year’s quarter while extending 68% of leases maturing this year at a rental growth of 8.4%.

Amid these solid operating performances, SmartCentres has reported an AFFO (adjusted funds from operations) per unit of $0.55, representing a 19.6% increase from the previous year. Moreover, the REIT has 59.1 million square feet of mixed-use development permits, with approximately one million square feet of properties currently under construction. Additionally, its solid tenant base, comprising 95% of tenants with national and regional presence, provides stability to its financials. Considering its solid financials and healthy growth prospects, I expect SmartCentres to continue paying dividends at a healthier rate. With a monthly payout of $0.1542/share, the company offers an attractive forward dividend yield of 7.15% as of the May 27th closing price.

Pizza Pizza Royalty

Pizza Pizza Royalty (TSX:PZA) is another monthly-paying dividend stock that I am bullish on due to its stable cash flows from franchised businesses and high dividend yield. The company operates Pizza Pizza and Pizza 73 brand restaurants through its franchises. It collects royalties from its franchises based on their sales. So, its financials are less prone to commodity price fluctuations and wage inflation.

Moreover, the company posted a healthy first-quarter performance earlier this month, with its same-store sales increasing by 1.2%. During the quarters, both brands experienced growth in traffic and average customer check size. It has also added 20 new restaurants to its royalty pool this year, increasing its restaurant count to 797. Despite these healthier operating performances, its adjusted EPS (earnings per share) stood flat at $0.23/share.

Furthermore, the company anticipates expanding its restaurant network by 2-3% this year while continuing its renovation program. Its innovative and compelling menu offerings, along with strong brand messaging, could also support its same-store sales, boosting its royalty income. Considering these growth initiatives, I expect PZA, which currently offers a forward dividend yield of 6.39%, could continue paying dividends at a healthier rate.

NorthWest Healthcare Properties REIT

NorthWest Healthcare Properties REIT (TSX:NWH.UN) owns and operates 169 healthcare real estate properties with a gross leasable area of 15.8 million square feet. The Toronto-based REIT leased or renewed 280,000 square feet of properties during the recently reported first-quarter earnings, thus raising its occupancy rate to 96.5% compared to 96.4% at the end of last year. Its same-property net operating income (SPNOI) rose 4.5% amid inflationary rent adjustments and higher recoveries.

NorthWest Healthcare generated $260 million through asset sales and divestment of its non-core investments during the first quarter and subsequent period. It used the net proceeds from these asset sales to lower its leverage. The company’s credit rating has also improved to BBB, an investment-grade rating, which could result in lower borrowing costs. The company also ended the first quarter with $268 million in liquidity, which could support its growth initiatives. Considering its solid occupancy and renewal rates, rising SPNOI, and improving financial position, NorthWest Healthcare could continue paying dividends at a healthier rate. With a monthly payout of $0.03/share, the company’s forward dividend yield stands at 7.50, making it an ideal buy.