For investors who prioritize regular, tax-free income, holding dividend-paying stocks inside a Tax-Free Savings Account makes a lot of sense. Some Canadian and U.S. companies distribute cash monthly, which can help you create a steady income stream without needing to sell shares. While regular dividend checks can be very appealing, yield and consistency matter just as much as payment frequency.
One stock worth considering is a Canadian real estate investment trust (REIT) that focuses on residential and commercial properties. REITs often pay monthly because they collect rent every month, and this cash inflow supports frequent distributions. A well-run REIT with a diversified portfolio and strong occupancy levels tends to generate reliable cash flow, which helps sustain monthly payouts. Inside a TFSA, those payments are completely tax-free, making them attractive for income building.
Another candidate might be a closed-end fund or income trust with exposure to infrastructure assets like utilities or energy pipelines. These businesses generate stable fee-based revenue, which in turn supports monthly cash distributions. They can offer higher yields than typical quarterly dividend stocks, but it’s crucial to check that distribution coverage is solid — meaning the company or trust earns enough to pay what it promises.
Finally, business development companies (BDCs) or certain high-yield U.S. equity income funds can pay monthly dividends. These vehicles often invest in floating-rate debt or a diversified income portfolio. Because they’re required to distribute most of their earnings, they frequently use monthly pay schedules. A TFSA shields you from withholding tax on U.S income, making monthly U.S. payouts more efficient, though currency risk should be factored into your plans.
Also Read: Long term investing in Canada
Before buying any of these, look beyond the headline yield. A very high monthly payout can sometimes signal elevated risk or a dividend that isn’t fully covered by earnings. Check payout history, payout ratios, balance sheet strength, and how distributions have held up through volatility.
Also Read: Stock investment Canada for beginners
Used thoughtfully, monthly-paying stocks and funds inside a TFSA can help build a dependable income stream without tax drag. Just balance yield with stability and diversification, and match your choices to your long-term financial goals.
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