Using your Tax-Free Savings Account (TFSA) annual limit or available contribution room is one of the most effective ways to generate tax-free passive income. You can choose not to collect your earnings and instead reinvest dividends to compound your wealth. The standard payment schedule on the TSX is quarterly, though some companies pay monthly.
A standout choice is Atrium Mortgage Investment Corporation (TSX: AI). This financial services stock is tailor-made for the TFSA. At $11.11 per share and a generous 8.3% yield, you’d receive monthly cheques.
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Stable and secure dividends
While the Canadian real estate market has been erratic lately, the MIC has delivered a 42.4% total three-year return, an approximately 12.5% compound annual growth rate (CAGR). The TSX historically averages 20% to 25% over three years. Atrium has also declared a special year-end dividend since going public in 2012 on top of its regular monthly payouts.
According to Rob Goddall, Atrium’s founder and CEO, the MIC’s investment objectives are to preserve shareholders’ equity and provide stable, secure dividends. Notably, the average dividend growth rate for the past three years is 4.3%.
If you buy 981 AI shares and hold them in your TFSA, your $10,898.91 investment will produce $75 tax-free income every month. The year-end top-up varies depending on interest rates, mortgage origination fees, and loan repayments. Still, under the Canadian Income Tax Act, MICs must distribute 100% of its net taxable earnings to shareholders as dividends each year.
The lending model
The $560.3 million MIC provides short- to medium-term commercial and residential mortgage financing in major Canadian urban centers where it has a strong local presence. About 83.5% of underlying properties are in the Greater Toronto Area (GTA). Its lending criteria include quarterly reviews of all loans except single-family mortgages. A director must also approve all loans except residential loans below $600,000.
Many borrowers turn to non-bank lenders like Atrium when major banks tighten lending parameters, increasing potential MIC loan bookings. As of June 30, 2026, the average loan size is $2.7 million, with first mortgages comprising 96.9% of the loan portfolio. The weighted average loan-to-value is 62.5%, while the weighted average term remaining is 12.6 months.
Reduced activity
Atrium notes the improving lending environment in both the commercial and residential real estate markets. However, activity levels were low, reducing the mortgage portfolio despite an increase in new loan business in Q2 2026.
In the six months ending June 30, 2026, revenue and net income declined 10.8% and 5.1% year-over-year, respectively, to $38.5 million and $23.7 million. Goodall expects the mortgage portfolio to exceed $900 million by year-end, matching the level at year-end 2025.
The Bank of Canada will announce its policy decision on October 28, 2026, with economists forecasting higher chances of a rate hike. This will increase demand for alternative lenders and allow Atrium to re-price its loans. However, it increases credit and default risk.
Maximum tax-free advantage
Atrium MIC is a logical option if you’re looking for a tailor-made TFSA stock. The conservative lending structure, including first-mortgage priority, helps mitigate rate-hike risk. More importantly, you capture the maximum tax-free advantage from its high-yielding monthly paycheques.
