Use a TFSA to Earn $475 a Month With No Tax

Generating reliable passive income without worrying about taxes cutting into your returns is one of the biggest advantages of investing through a Tax-Free Savings Account (TFSA). By holding high-yield dividend stocks inside your TFSA, you could build a growing stream of tax-free income while also benefiting from long-term capital appreciation.

However, to achieve this goal, you should ideally focus on companies that combine strong cash flow, dependable dividends, and long-term growth potential. One TSX stock that currently checks all those boxes is Surge Energy (TSX:SGY). This Canadian oil and gas producer has been delivering impressive operational results lately while rewarding shareholders with attractive monthly dividend payments.

In this article, I’ll explain why Surge Energy could be an attractive TFSA stock for investors seeking steady tax-free income.

Surge Energy stock has been gaining momentum

Headquartered in Calgary, Surge Energy is an oil and gas exploration, development, and production company focused mainly on light and medium-gravity crude oil assets in Alberta, Saskatchewan, and Manitoba.

The company’s core producing areas include Sparky and Southeast Saskatchewan, where it continues expanding production through low-risk drilling opportunities and waterflood projects.

Following a solid 92% rally over the last year, SGY stock currently trades at $9.96 per share, giving it a market capitalization of roughly $985 million.

In addition to its strong share-price gains, Surge Energy offers an annualized dividend yield of 5.2%, with monthly payments – making it even more appealing for investors seeking recurring passive income.

Strong drilling results are driving financial growth

In recent quarters, Surge Energy’s operations have strengthened, which has continued to boost its financials. In the first quarter of 2026, the company exceeded its own production expectations by averaging 23,893 barrels of oil equivalent per day (boe/d), ahead of its budgeted target of 23,000 boe/d. This stronger-than-expected production growth was driven largely by successful drilling and waterflood activity in its Sparky and Southeast Saskatchewan operations.

As a result, the company generated adjusted funds flow (AFF) of $70.9 million for the quarter, and its cash flow from operating activities came in at $60 million.

At the same time, Surge Energy is also showing strong capital discipline. In the latest quarter, its property, plant, and equipment spending declined 18% year-over-year to $44.6 million. That efficiency helped the company generate free cash flow of $26.3 million during the quarter, representing roughly 37% of AFF.

Long-term growth potential remains strong

Beyond its current financial strength, Surge Energy also continues to focus on future expansion. The company currently has more than 900 internally identified drilling locations, giving it over 12 years of potential development opportunities.

Its ongoing waterflood projects could also help improve recovery rates and support long-term production growth while maintaining operational efficiency. Surge is even evaluating a possible expansion of its 2026 capital program to further increase production growth during the second half of the year.

Meanwhile, the company’s underlying asset value remains attractive. The oil and gas producer estimates its net asset value at US$75 West Texas Intermediate (WTI) oil pricing at $11.04 per share for total proved reserves and $17.10 per share for proved and probable reserves.

COMPANYRECENT PRICENUMBER OF SHARESDIVIDENDTOTAL PAYOUTFREQUENCYSurge Energy$9.9611,000$0.043333$476.66MonthlyPrices as of May 12, 2026

Why Surge Energy could fit well inside a TFSA

Surge Energy combines several attractive qualities for TFSA investors including monthly dividend income, strong free cash flow generation, operational momentum, and long-term growth potential. While energy stocks may remain volatile, Surge Energy’s disciplined capital management and improving financial performance could support its future dividend payments and additional upside potential.

At current prices, 11,000 shares of Surge Energy in your TFSA could generate roughly $476.66 in tax-free monthly dividend income or about $5,680 a year. Though with the position costing around $108,790, it would be wiser to diversify your portfolio instead of relying too heavily on one stock.

The post Use a TFSA to Earn $475 a Month With No Tax appeared first on The Motley Fool Canada.

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More reading

• 2 High-Yield TSX Stocks Worth Buying if You Have $2,000 to Put to Work
• 1 Canadian Stock Supercharged and Ready to Surge in 2026

Fool contributor Jitendra Parashar has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.