Use a TFSA to Make $500 in Monthly Tax-Free Income

Your Tax-Free Savings Account (TFSA) can do more than sit there looking polite. It can pay you monthly, tax-free. Even a lower-yield dividend stock can matter because you keep every dollar inside the account, then you reinvest it or spend it without a tax bill. The key is rhythm. Regular cash can keep you invested when headlines get loud. A lower yield can signal room to grow, and less pressure to cut when times tighten. So, let’s look at one offering up a high yield with room to grow.

SRU

SmartCentres REIT (TSX:SRU.UN) looks relevant right now because it blends two things Canadians still want. That’s everyday retail and a long-term plan to add housing and other uses on valuable land. It calls itself one of Canada’s largest fully integrated REITs, with 197 properties and a big land bank. It also reported 98.6% in-place and committed occupancy at Sept. 30, 2025, which matters when you want steady rent cheques.

The business snapshot stays simple. SmartCentres collects rent from tenants across its shopping-centre portfolio, then it redevelops sites over time. You get retail leases today, plus development upside tomorrow. That mix can smooth cash flow, but it can also create bumps, as projects take time and money. Rates also matter because real estate investment trusts (REITs) borrow, and investors compare yields to bonds.

Recent performance has behaved like an income stock, not a rocket ship. Shares are now up about 8% in the last year, with a major bump in the last part of 2025. SmartCentres declared a December 2025 distribution of $0.15417 per unit, which annualizes to $1.85 as well, currently yielding at 7%. That gives you a clean number for planning.

Into earnings

Now to earnings, as income investors need receipts. In the third quarter (Q3) of 2025, SmartCentres reported funds from operations (FFO) per unit of $0.59 versus $0.71 a year earlier, and it tied much of the swing to fair value noise. SmartCentres also reported FFO with adjustments per unit of $0.56 versus $0.53, which better reflects the operating trend.

The forward-looking story looks more interesting than the quarter-to-quarter wobble. Management highlighted 4.6% same-property net operating income (NOI) growth excluding anchors and strong renewal spreads, while occupancy stayed steady. It also pointed to a development pipeline that includes self-storage facilities slated to open in 2026, plus more in 2027. If SmartCentres keeps leasing strong and costs controlled, those projects can lift future cash flow.

Valuation feels straightforward, but the risks still show up. At about $26 per unit and $1.85 in annual distributions, you can see the cash return. You also need to watch coverage, and SmartCentres reported a payout ratio to adjusted FFO of 95.1% in Q3 2025, which leaves less room for surprises. Furthermore, SmartCentres said it extended certain arrangements with Mitchell Goldhar and Penguin Group to Feb. 28, 2026, while talks continue. That headline can move sentiment and unit prices, even when rent stays steady.

Bottom line

So, how do you get to $500 per month? Here’s what that might look like at writing.

COMPANYRECENT PRICENUMBER OF SHARESDIVIDENDANNUAL TOTAL PAYOUTFREQUENCYTOTAL INVESTMENTSRU.UN$26.503,243$1.85$5,999.55Monthly$85,939.50

That number can feel big, so treat it as a target you build toward inside your TFSA, one contribution at a time. SmartCentres can still work even if you stop caring about the pay date. It pays monthly today, but you should buy it for the rent engine and the long runway for redevelopment. If the distribution ever moved to quarterly, you could still create a monthly “paycheque” by keeping a small cash buffer inside the TFSA and topping it up when the distribution arrives. Keep the position size sensible, as unit prices can swing when rates jump or retail sentiment turns, and a high payout ratio can force tough choices.

The post Use a TFSA to Make $500 in Monthly Tax-Free Income appeared first on The Motley Fool Canada.

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* Returns as of January 15th, 2026

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Fool contributor Amy Legate-Wolfe 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.