Transform Your TFSA Into a Cash-Gushing Machine With Just $20,000

Here’s the straight answer: split $20,000 equally between Alaris Equity Partners Income Trust (TSX:AD.UN) and Timbercreek Financial (TSX:TF), and you’ll own two businesses built from the ground up to pay you.

Both Canadian stocks generate healthy distributable cash flow right now. Both have growth catalysts building in the background. And inside a TFSA (Tax-Free Savings Account), every dollar of income they produce lands in your pocket completely tax-free.

Here’s why each one earns its place in the portfolio.

A private equity royalty machine

Most investors can’t access private equity. The minimum investments are too large, the lock-up periods are too long, and the structures are too complicated. Alaris solves that problem:

• The Calgary-based firm invests in profitable, privately owned businesses, typically in healthcare services, business consulting, distribution, and other stable industries.
• In exchange for capital, it receives royalty-like distributions from those businesses.
• The result is a predictable, recurring income stream that flows directly to unitholders.

In 2025, Alaris deployed a record $387 million in capital across 23 active platform partners. Full-year earnings from operations grew 17.3%. And despite elevated transaction activity, the payout ratio came in at just 56.6% for the year, comfortably below the company’s 65%-70% target range.

That gap between earnings and distributions matters. It means Alaris has room to raise its dividend, which it has already done recently, and the flexibility to maintain payouts amid economic downturns.

CEO Steve King said on the call that 2026 could be the year the company starts “harvesting” several of its common equity investments: a process that could trigger meaningful capital gains, accelerate distributions, and fund new deployments at even higher returns.

Valued at a market cap of $900 million, the TSX dividend stock offers shareholders an attractive yield of 7.4% in March 2026.

Mortgage income backed by brick and mortar

Timbercreek does one thing and does it well. It lends money to commercial real estate borrowers, primarily against income-producing properties such as apartment buildings, retail plazas, and well-located urban assets, and collects interest.

• The portfolio ended 2025 at $1.24 billion, up $150 million year over year.
• Q4 originations were strong at over $330 million, pushing the portfolio up 18% sequentially.
• Distributable income per share came in at $0.18 in Q4, consistent with Q3, and the payout ratio landed within the company’s target range.
• The dividend has been steady, and management expects the payout ratio to remain well covered in 2026.
• The Canadian mortgage lender offers shareholders a tasty dividend yield of 10.4%.

The main story in 2025 was the company working through a handful of legacy “stage loans,” which were impaired files left over from the shock of rapid interest rate hikes starting in 2022.

Those loans weighed on reported earnings and book value. But the underlying distributable income stayed healthy throughout, and management expects to resolve the bulk of these files by the end of 2026. Once that capital is freed up and redeployed into new loans at current spreads, Timbercreek’s earnings profile improves.

Head of Originations Geoff McTait noted on the call that credit spreads have already widened by 50 to 75 basis points over the past year, meaning new loans are being written at better margins than those they’re replacing.

With 95% of the portfolio in first mortgages, a weighted-average loan-to-value ratio of 67.4%, and 84% of investments in cash-flowing properties, the risk profile here is conservative by design.

Neither stock is flashy. That’s the point. Inside a TFSA, boring, dependable income compounds quietly and powerfully over time. Alaris and Timbercreek are built for exactly that.

The post Transform Your TFSA Into a Cash-Gushing Machine With Just $20,000 appeared first on The Motley Fool Canada.

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More reading

• Chasing Passive Income? These 2 Canadian Dividend Stocks Yield 9% and Can Back It Up
• Got $25,000? Transform a TFSA Into a Cash-Gushing Machine

Fool contributor Aditya Raghunath has no position in any of the stocks mentioned. The Motley Fool recommends Alaris Equity Partners Income Trust. The Motley Fool has a disclosure policy.