How to Use Your TFSA to Average $1,500 per Year in Tax-Free Passive Income

Dividend stocks are ideal for long-term wealth creation as investors can benefit from both potential stock price appreciation and a steady stream of passive income. Reinvesting these dividends can further enhance total returns through compounding, helping investors reach their long-term financial goals faster. In addition, high-quality dividend-paying companies typically operate resilient businesses with dependable cash flows, making them better equipped to withstand market volatility and provide greater portfolio stability.

With that in mind, let’s examine two quality TSX dividend stocks that can generate approximately $1,500 in annual dividend income from a $38,000 investment split equally between them. Meanwhile, by holding these investments in a Tax-Free Savings Account (TFSA), investors can earn both dividend income and capital gains tax-free.

Enbridge

Enbridge (TSX:ENB) is an excellent choice for income-seeking investors, thanks to its attractive dividend yield and exceptional track record of dividend growth. The company operates a diversified energy infrastructure business that includes crude oil and natural gas pipelines, regulated natural gas utilities, and renewable power assets. The company earns approximately 98% of its earnings from regulated assets or long-term take-or-pay contracts, and nearly 80% of those earnings are protected by inflation-indexed mechanisms. This highly predictable business model generates stable earnings and cash flows while reducing its exposure to commodity price volatility and inflationary pressures.

Backed by these dependable cash flows, Enbridge has consistently increased its dividend for 31 years and currently offers an attractive forward dividend yield of 5%.

Looking ahead, Enbridge has identified approximately $50 billion in future growth opportunities, supported by rising oil and natural gas production across North America, which continues to drive demand for its infrastructure and services. To capitalize on these opportunities, the company expects to invest $10–$11 billion annually to expand its asset base. As these projects enter service, management expects earnings per share and distributable cash flow per share to grow at approximately 5% compounded annually through the end of the decade.

Enbridge also remains committed to rewarding shareholders and expects to return $40–$45 billion over the next five years through dividends and share repurchases, reinforcing the sustainability of its capital return program and supporting continued dividend growth.

Fortis

Another dividend stock that I believe is an excellent choice for income-seeking investors is Fortis (TSX:FTS), which serves approximately 3.5 million electric and natural gas customers across North America. With nearly all of its earnings generated from regulated utility operations, primarily low-risk electricity transmission and distribution assets, Fortis generates stable and predictable earnings that are largely insulated from market volatility, economic cycles, and commodity price fluctuations. This resilient business model has enabled the company to increase its dividend for 52 consecutive years – one of the longest dividend-growth streaks among TSX-listed companies. Fortis currently pays a quarterly dividend of $0.64 per share, yielding 3.2% at current prices.

Looking ahead, Fortis is well-positioned to benefit from rising electricity demand driven by population growth, the electrification of transportation and industry, and the rapid expansion of AI-ready data centres. To meet this growing demand, the company plans to invest $28.8 billion through its five-year secured capital program, which could expand its regulated rate base at a 7% compound annual growth rate to $57.9 billion by 2030.

As these investments begin contributing to earnings, Fortis expects to continue delivering steady financial growth. Management has reaffirmed its intention to increase the dividend by 4–6% annually through 2030, making Fortis an attractive long-term investment for investors seeking reliable and growing passive income.

The post How to Use Your TFSA to Average $1,500 per Year in Tax-Free Passive Income appeared first on The Motley Fool Canada.

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More reading

• Enbridge: Buy, Sell, or Hold in 2026?
• 2 Canadian Dividend Stocks That Look Reasonably Priced Right Now
• How $20,000 Across 4 TSX Stocks Can Deliver $1,000 in Passive Income
• A Dividend Stock to Buy and Hold Through Market Volatility
• How to Use a TFSA to Generate an Average of $381.50 in Monthly Tax-Free Income

Fool contributor Rajiv Nanjapla has no position in any of the stocks mentioned. The Motley Fool recommends Enbridge and Fortis. The Motley Fool has a disclosure policy.