How Canadian Couples Can Collect $750 Per Month in Tax-Free Passive Income
The Motley Fool
Published May 14, 2019 08:44
Updated May 14, 2019 09:06
Imagine having an extra $750 per month in cash without working more hours or taking on a weekend gig at the local pub.
It seems like a dream, but Canadian couples can take advantage of their existing TFSA contribution room to own quality dividend stocks and essentially start their pension early.
Since the launch of the Tax-Free Savings Account (TFSA) in 2009, Canadian residents that were at least 18 years old at the time now have a maximum contribution room of $63,500. A couple would have $127,000 in cumulative contribution room available. You might not have $127,000 sitting around right now, but making small contributions each month adds up quickly, and people often come across extra cash from a work bonus, the sale of some stuff they no longer use, a small inheritance, or even the proceeds from a lucky day at the race track.
Let’s take a look at two stocks that might be interesting picks to help you set up your passive-income TFSA portfolio.
Inter Pipeline (TSX:IPL) Inter Pipeline owns natural gas extraction assets, oil sands pipelines, and conventional oil pipelines in the Canadian energy patch. The company also owns a growing liquids storage operation with facilities located in a number of European countries.
The diverse revenue stream helps smooth out any volatility in a particular segment. Last year, the gas processing division benefitted from improved market prices, while the liquids storage business saw a drop in utilization. In Q1 2019, the roles reversed.
Inter Pipeline is making good progress on its $3.5 billion Heartland Petrochemical Complex and has a knack for finding strategic tuck-in acquisitions.
The company has raised the dividend for 10 straight years. The existing payout provides an annualized yield of 8.2%.
Power Financial (TSX:PWF) Power Financial is a holding company with interests in a number of Canadian wealth management and insurance businesses. It is also a partner in a European holding company that holds stakes in a number of Europe’s top global companies.
The portfolio is performing well, and management is doing a good job of sharing the spoils with investors. Power Financial raised the dividend by 5% this year and recently repurchased $1.65 billion in stock.
The current dividend provides a 6% yield.
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The bottom line An equal investment between the two stocks would provide an average yield of 7.1%. This would generate about $9,000 per year, or just over $750 per month in tax-free income for a couple who each maxed out their $63,500 in contribution room.
Diversification is advised when building an income portfolio, and the TSX Index has many other reliable dividend stocks that offer attractive yields.
Fool contributor Andrew Walker has no position in any stock mentioned.
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This Article Was First Published on The Motley Fool
Written By: The Motley Fool
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