How to Use a TFSA to Bring in $1,000 a Month — Completely Tax-Free

Nexus Industrial REIT (TSX:NXR.UN) is among the more compelling small-cap opportunities on the TSX right now.

Most retail investors have never heard of this real estate investment trust (REIT). However, as we head into the second quarter (Q2) of 2026, I believe Nexus is undervalued and offers upside potential, providing investors with a steady stream of passive income.

Nexus completed a major transformation

For years, Nexus held retail properties alongside its industrial assets, which made it harder to value and easier to ignore.

The REIT sold its retail portfolio at the start of 2025, raising $47 million. Today, 99% of its net operating income (NOI) comes from industrial properties across Canada.

Chief Executive Officer Kelly Hanczyk described the company’s new purpose as being “Canada’s industrial building partner,” and that focus shows up in the numbers.

• Full-year 2025 adjusted earnings before interest, tax, depreciation, and amortization (EBITDA) hit a record $120 million.
• NOI rose 2.8% to a record $129 million.
• Its funds from operations rose to $0.61 per share while the net asset value grew to $13.22 per share.
• By comparison, the REIT offers shareholders an annual dividend of $0.64 per share, which translates to an annual yield of nearly 8%.

The investment-grade push is a key catalyst

Nexus currently has an elevated debt-to-EBITDA ratio of nearly 11 times. But management also laid out a clear plan to reach the nine-times range by year-end 2026.

Notably, DBRS, a credit rating agency, has indicated that a debt-to-EBITDA ratio of around nine times is the threshold for an investment-grade rating. And an investment grade rating would meaningfully lower Nexus’s borrowing costs while opening the door to a much larger pool of institutional investors.

Chief Financial Officer Mike Rawle was direct about the lender environment on the call: “Everyone wants to lend to you just before that because they want part of the debt deal.”

The path to getting there involves a combination of asset sales, development completions, and organic NOI growth.

Several transactions are already in motion:

• A firm sale contract exists for a 190,000-square-foot building in Red Deer, Alberta, with closing in April.
• The Glover Road property in Hamilton is being marketed.
• And the 50% stake in a retail mall is also being soft-marketed.

Each completed sale reduces leverage and frees up capital.

A strong growth pipeline

Beyond the balance sheet repair story, Nexus has a robust development pipeline taking shape.

Two new projects were recently announced.

• An up to 180,000 square foot micro industrial development at Adams Road in Kelowna, British Columbia, with an expected yield between 7% and 10%.
• An 80,000-square-foot expansion at Savage Road in Richmond, BC, is expected to deliver a stabilized 6% yield in one of Canada’s tightest industrial markets.

The Montreal acquisitions completed in late 2025 also deserve attention. Nexus paid roughly $145 per square foot for two buildings that comparable properties trade at $215 to $235 per square foot. A year-end appraisal confirmed a mark-to-market gain of approximately $23 million.

Own the TSX dividend stock in the TFSA

Nexus units trade at a meaningful discount to NAV. The business is growing, and the balance sheet is improving. Additionally, an investment-grade rating could act as a re-rating catalyst before year-end.

Income-seeking shareholders can consider holding the TSX dividend stock in the Tax-Free Savings Account to benefit from tax-free dividend income and capital gains.

COMPANYRECENT PRICENUMBER OF SHARESDIVIDENDTOTAL PAYOUTFREQUENCYNexus Industrial REIT$8.0818,875$0.053$1,000Monthly

Nexus REIT trades at a 5% discount to consensus price targets. Further, to earn $1,000 in monthly dividend income, you need to buy 18,875 shares of the REIT, which are worth roughly $152,500 today.

Investing such a huge sum in a single stock is very risky. Canadian investors should consider diversifying their portfolios with other high-yield dividend stocks.

The post How to Use a TFSA to Bring in $1,000 a Month — Completely Tax-Free appeared first on The Motley Fool Canada.

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More reading

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• My 3 Favourite Canadian Stocks for Passive Income

Fool contributor Aditya Raghunath has no position in any of the stocks mentioned. The Motley Fool recommends Nexus Industrial REIT. The Motley Fool has a disclosure policy.