Business & Investment

TFSA Investor: How to Make $ 100 Monthly Tax-Free

You may have heard of it Duty Free Savings Account (TFSA) is a great place to hold an investment to earn interest income. This is because interest income is taxed at the marginal tax rate of the taxable account.

The problem is that interest rates are currently very low. Therefore, interest-bearing investments do not bring you a lot of passive income. The highest 5-year GIC rate is 2.2%. Quality corporate bonds provide more or less yields around that rate.

To get more tax-exempt income with TFSA, you should immediately consider investing in dividend stocks that offer higher yields.In addition, many of these dividend stocks Increase dividends with time.

So if you start earning $ 100 a month with TFSA this year, it could increase by 10% to $ 110 a month next year and $ 121 the following year.

This is a high-yielding, high-quality dividend growth stock with annual dividend growth of over 10%.

Earn $ 100 per month from this Canadian dividend stock tax-free

Canadian net REIT Changed the brand name from (TSXV: NET.UN) Fronsac REIT, Make it more self-explanatory. Canada’s Real Estate Investment Trusts (REITs) invest in high-quality, triple-net, unmanaged commercial real estate. And in the last 10 years, we have achieved 22% annually, outperforming our performance.

Currently, the yield is 3.75%. To earn $ 100 a month in TFSA from a stock, you need to invest $ 32,000 in that stock. Of course, it has a lot to invest in lump sum payments. You should invest an amount that makes sense to you.

Also, because it is a small-cap stock with a small trading volume, it is easier to stack hundreds of stocks instead of thousands at a time. You can also place your order as long as possible with your desired purchase price target to save commissions.

Since REIT cash distributions have historically consisted primarily of capital returns, TFSAs are actually the best place to deposit funds in Canada’s online REITs.

In 2020, 50% of the cash distribution was the return of capital. This will defer taxes until the adjusted cost standard becomes negative or the stock is sold. Investors who own NET.UN at TFSA do not have to worry about paying taxes at all. All cash distributions and final profit taking of shares are tax exempt.

Passive income increased by + 10%

At a growth rate of 10%, dividend income will double in about 7.2 years. The Canadian Net REIT’s five-year dividend growth rate was 10.8%. Recent dividend increases are showing signs of accelerating, and given the company’s recent performance, this could be very continuing.

Last year was a very difficult time for many companies, given the pandemic.However First-class REIT We managed to maintain a high occupancy rate of 99% (down 1% from the previous year), increase the operating capital (FFO) per unit by 18%, and increase the dividend by 15%.

With a dividend rate of 52% in 2020, it is a super-defensive ratio to keep dividends safe and give room for growth.We also enjoy a great capitalization rate of about 6.5%

Takeaway of stupid investors

Canada’s net REITs are trading at $ 8 per unit at the time of writing, just 16.3 times the 2020 FFO. This is a cheap assessment of the potential double-digit growth rate. The underlying business is very defensive and has essentially no negative impact from the business cycle.

Combining good yields, attractive valuations, and double-digit growth rates, Canadian Net REITs are excellent stocks to accumulate in TFSA to increase tax-exempt income.

Speaking of high quality dividend stocks purchased and held at TFSA …

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This article represents the opinion of a writer who may disagree with the “official” recommendation position of the Motley Fool Premium Services or Advisors. We are Motley! Asking investment treatises, even our own treatises, can help you think critically about your investment and make decisions to be smarter, happier, and richer. As a result, we may publish articles that may not match recommendations, rankings, or other content. ..

The Motley Fool recommends the Canadian Net Real Estate Investment Trust. Stupid contributor Cain I own a stake in Canadian Net Real Estate Investment Trust.

TFSA Investor: How to Make $ 100 Monthly Tax-Free TFSA Investor: How to Make $ 100 Monthly Tax-Free

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