How Canadians Can Generate $500 Monthly Tax-Free From a TFSA

A steady and dependable stream of passive income is especially valuable in today’s uncertain economic climate. It not only enhances financial stability but also helps offset the impact of rising living costs. Moreover, consistently reinvesting these payouts can accelerate portfolio growth and bring investors closer to their long-term financial goals.

In a low-interest-rate environment, allocating capital to high-quality monthly dividend stocks with attractive yields can be an effective way to generate stable income. For instance, investing $95,000 equally in the following two reliable Canadian stocks could potentially generate over $500 in monthly income.

Additionally, investors can enhance their after-tax returns by holding these investments within a Tax-Free Savings Account (TFSA), where gains on their eligible investments are tax-free. For Canadians who were at least 18 years old in 2009 and want to start investing in their TFSA, the cumulative contribution room is $109,000.

With this in mind, let’s take a closer look at these two income-generating opportunities.

SmartCentres Real Estate Investment Trust

SmartCentres Real Estate Investment Trust (TSX:SRU.UN) owns and operates 198 strategically located properties across Canada, with nearly 90% of the population living within 10 kilometres of one of its shopping centres. The real estate investment trust (REIT) also benefits from a strong tenant mix, with about 95% of its tenants having a regional or national presence. Additionally, roughly 60% of its tenants provide essential services, supporting stable demand and helping maintain high occupancy levels regardless of broader economic conditions.

In its most recent fourth-quarter results, the REIT leased 35,500 square feet of vacant space, bringing total leasing activity for the year to 430,000 square feet. Its occupancy rate stood at a solid 98.6% at year-end. The company also reported a 3.7% increase in same-property net operating income (NOI). Backed by this strong operating performance, its adjusted funds from operations (AFFO) rose 2.8% year over year to $369.99 million in 2025, while AFFO per unit increased 4.71% to $2.00.

Looking ahead, SmartCentres continues to expand its asset base, supported by a robust development pipeline of 86.2 million square feet, including 0.8 million square feet currently under construction. Combined with its defensive, retail-focused portfolio, these growth initiatives could strengthen its financial performance and cash flows over time, enabling the REIT to continue delivering reliable and attractive dividends to its shareholders. Currently, the company offers a monthly dividend of $0.1542/share, translating into a forward yield of 6.97%.

Pizza Pizza Royalty

Pizza Pizza Royalty (TSX:PZA) operates the Pizza Pizza and Pizza 73 brands through a franchise-based model, earning royalties from franchisees based on their sales. This asset-light structure makes its financial performance less sensitive to fluctuations in commodity prices and wage inflation.

The company’s management is committed to distributing substantially all available cash to shareholders after setting aside reasonable reserves, thereby maximizing shareholders’ returns. While the restaurant industry is inherently seasonal, PZA aims to provide consistent monthly payouts to smooth investor income. Its current monthly dividend of $0.0775 per share yields 5.92%.

Since the beginning of the year, the company has added 39 new restaurants to its royalty pool while removing 19 restaurants that ended their operations last year. As a result, its royalty pool now includes 712 Pizza Pizza and 102 Pizza 73 restaurants. Alongside this network expansion, the company continues to enhance its digital platforms, introduce new menu items, and improve service speed to drive customer satisfaction.

Additionally, its recently completed renovation program could boost customer traffic and support same-store sales growth. With its asset-light business model, steady cash flows, and ongoing expansion initiatives, PZA appears well-positioned to sustain—and potentially grow—its dividend payouts over time.

The post How Canadians Can Generate $500 Monthly Tax-Free From a TFSA appeared first on The Motley Fool Canada.

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More reading

• A Safe 7% Yield: Here’s What I’d Look for
• This Simple TFSA Plan Could Pay You Monthly in 2026
• Build a Cash-Gushing Passive-Income Portfolio With $14,000
• 2 Safer High-Yield Dividend Stocks for Canadian Retirees
• How $30,000 Split Across Three TSX Stocks Can Generate $1,705 in Dividends

Fool contributor Rajiv Nanjapla has no position in any of the stocks mentioned. The Motley Fool recommends SmartCentres Real Estate Investment Trust. The Motley Fool has a disclosure policy.