How to Turn $25,000 Into a Tax-Free Income Machine Using Your TFSA
The Tax-Free Savings Account (TFSA) is one of the most powerful tools Canadian investors have to generate steady, tax-free income. Unlike other accounts, any income earned — including dividends — is completely sheltered from tax, potentially saving you 10–20% or more each year depending on your income bracket.
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Want to put your TFSA to work? Here’s a simple five-stock portfolio that could turn a $25,000 investment into over $1,300 in annual, tax-free income — all while positioning yourself for long-term growth.
✅ 1. Pembina Pipeline (TSX:PPL) – Reliable Energy Income
- Investment: $5,000
- Price per share: $54.13
- Shares: 92
- Dividend Yield: 5.3%
- Annual Income: $261.28
Pembina is a key player in Canadian energy infrastructure — and one of the few already developing a liquified natural gas (LNG) terminal on the West Coast. With Canada doubling down on its energy export potential, Pembina is positioned to benefit from future infrastructure projects. Add a solid balance sheet and a well-covered dividend, and this stock makes a strong foundation for income investors.
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🌱 2. Northland Power (TSX:NPI) – Clean Energy with Global Reach
- Investment: $5,000
- Price per share: $22.75
- Shares: 219
- Dividend Yield: 5.25%
- Annual Income: $262.80
Northland Power is a leader in renewable energy, with projects in offshore wind, solar, battery storage, and more. It’s nearing completion on a major wind farm in Taiwan, which should boost cash flow in the near term. For TFSA investors, this stock offers a blend of stable income and exposure to the green energy transition.
🛢️ 3. Topaz Energy (TSX:TPZ) – Royalty Play on Canadian Energy
- Investment: $5,000
- Price per share: $25.93
- Shares: 192
- Dividend Yield: 5.4%
- Annual Income: $261.12
Topaz isn’t a typical oil producer. Instead, it earns royalties and rents infrastructure to Western Canadian energy firms. With major players like Tourmaline Oil planning to ramp up production, Topaz is in a strong position to benefit passively from increased output — all while paying a generous dividend.
🍔 4. A&W Revenue Royalties Income Fund (TSX:AW.UN) – Consistent Consumer Income
- Investment: $5,000
- Price per share: $38.11
- Shares: 131
- Dividend Yield: 5%
- Annual Income: $251.52
A&W is one of Canada’s most recognized quick-service restaurant brands. While not a high-growth name, it delivers reliable income and slow, steady dividend growth. It’s a strong defensive choice, especially during uncertain economic times, and a good way to diversify a TFSA income strategy.
🏭 5. Dream Industrial REIT (TSX:DIR.UN) – Passive Real Estate Income
- Investment: $5,000
- Price per unit: $12.55
- Units: 398
- Dividend Yield: 5.6%
- Annual Income: $278.60
Dream Industrial owns and manages high-quality industrial properties across Canada and Europe, with a 95%+ occupancy rate and rising rental income. Plus, its assets are trading at a steep discount to private market value — offering not just strong income, but potential upside. A smart way to be a landlord without the headaches.
Final Thoughts
With a $25,000 investment, this five-stock TFSA portfolio delivers a diversified mix of infrastructure, energy, real estate, and consumer staples — all while generating over $1,300 in tax-free income per year.
Whether you’re aiming for passive income, long-term wealth, or both, these stocks can help turn your TFSA into a cash-pumping machine — one dividend at a time.
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