HomeBlogInvestmentRetirement Passive Income: Imagine $390 Tax-Free Per Month for Life!

Retirement Passive Income: Imagine $390 Tax-Free Per Month for Life!

Canadian investors can take advantage of their growing Tax-Free Savings Account (TFSA) limit to build diversified portfolios of top TSX dividends stocks that can generate reliable and growing passive income for decades.

The market correction is giving TFSA investors an opportunity to buy great high-yield dividend stocks at cheap prices. Canadians now have up to $81,500 in TFSA contribution space that can generate tax-free income.


Enbridge (TSX:ENB)(NYSE:ENB) is a leader in the North American energy infrastructure sector with oil pipelines, natural gas pipelines, natural gas utility businesses, and renewable energy assets. The company moves 30% of the oil produced in the United States and 20% of the natural gas consumed by American businesses and households.

Demand for Canadian and U.S. energy is growing, as Europe shifts away from its reliance on Russia, and other countries seek out reliable liquified natural gas (LNG) supplies, as they transition from burning coal and oil to gas-fired power plants.

Enbridge’s recent investments put it in a good position to benefit from the export trend. The company spent US$3 billion on an oil export terminal last year and recently announced a deal to take a 30% stake in the $5.1 billion Woodfibre LNG facility being built in British Columbia.

Enbridge stock trades near $54.50 per share compared to more than $59.50 in June. The dip looks overdone, and investors can now get a 6.3% dividend yield. Enbridge is a good stock to buy for investors who want reliable high-yield passive income that steadily increases. The board raised the dividend in each of the past 27 years.

Bank of Nova Scotia

Bank of Nova Scotia (TSX:BNS)(NYSE:BNS) trades for $73.50 per share at the time of writing compared to $94.50 in February. The steep pullback gives buy-and-hold TFSA investors a chance to pick up a solid 5.6% dividend yield and get a shot at some decent upside when the bank stocks rebound.

A recession is likely on the way in 2023 or 2024, but most analysts and economists expect the downturn to be mild and short. Businesses and households are still sitting on ample savings built up during the pandemic, and this should help the economy navigate a soft landing, as the Bank of Canada raises interest rates to try to reduce inflation.

Bank of Nova Scotia raised its dividend by 11% late last year and increased the payout by another 3% when the company released the fiscal second-quarter (Q2) 2022 results. The bank finished fiscal Q3 with a common equity tier-one (CET1) ratio of 11.4%. This is a measure of the bank’s ability to ride out difficult times. The government requires a CET1 ratio of 10.5%, so Bank of Nova Scotia is sitting on excess cash it can deploy through takeovers or share buybacks. Adjusted earnings per share for fiscal Q3 2022 came in at $2.10 compared to $2.01 in the same period last year. The bank remains very profitable, despite the economic headwinds.

Rising interest rates will cause an increase in loan defaults, but they also tend to boost net interest margins for the banks, and this helps offset the negative impacts of higher borrowing costs.

The bottom line on top stocks to buy for passive income

Enbridge and Bank of Nova Scotia pay attractive dividends that should continue to grow. An investment split between the two stocks would generate a yield of nearly 6%.

The market pullback has driven up the yields on many top TSX dividend stocks, and investors can quite easily put together a diversified portfolio that generates a yield of at least 5.75%. On a TFSA of $81,500, this would generate $4,686.25 per year in passive income. That’s more than $390 per month!

If you have some cash to put to work in a TFSA focused on passive income, these stocks look cheap right now and deserve to be on your radar.

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