How to Use a TFSA to Earn $500 a Month — Completely Tax-Free

What would you do if you found a way to earn $500 per month in tax-free and passive income? Canadians have several ways to generate a passive income, but one of my favourites is using the Tax-Free Savings Account (TFSA) to hold a self-directed portfolio of dividend stocks.

When you invest in the right combination of dividend stocks and use the power of compounding to accelerate your wealth growth, making $500 a month is possible. The best part about it is that you do not need to work hard since the market will already do it for you.

There’s no shortage of dividend stocks you can invest in for this purpose. Today, I will discuss two stocks that might fit the bill for such a portfolio.

Enbridge

Enbridge (TSX:ENB) might be one of my favourite picks among dividend stocks to buy and hold for the long run. The $167.92 billion market cap energy infrastructure company has an extensive network of pipelines that it uses to transport a lot of the crude and natural gas produced and consumed in North America. It also has one of the biggest utility businesses in the region that provides additional and stable cash flows for the business.

Enbridge has a resilient business model that lets it pay shareholders their dividends regularly. The company has been distributing quarterly dividends for around 70 years, having increased payouts for over three decades. As of this writing, Enbridge stock trades for $76.90 per share and pays investors $0.97 per share each quarter, translating to a juicy 5.05% dividend yield that you can lock into your TFSA.

Telus

Telus (TSX:T) is another pick to consider for your self-directed investment portfolio. Telus is a giant in the Canadian telecom space, boasting roughly a third of the market share and a $25.75 billion market capitalization. The company operates subscription-based services across wireless, wireline, TV, and internet segments, giving it a defensive appeal and recurring revenues.

Higher interest rates in the last few years weighed on the company’s financials, resulting in a dip in share prices that inflated its dividend yield to double digits. Fortunately, the company’s performance has since improved, especially as its cost-cutting measures bear fruit. As of this writing, it trades for $16.49 per share and pays investors $0.4184 per share each quarter, translating to a 10.15% dividend yield. It might be the right time to invest in its shares and lock in those high-yielding dividends.

Foolish takeaway

The table below illustrates how investing a hypothetical $45,000 in Enbridge stock and $40,000 in Telus stock can mean over $500 per month in tax-free dividends in your self-directed TFSA portfolio. It’s important to remember that the example is only for illustrative purposes. When using this strategy, it’s much safer to diversify across several stocks to get similar returns.

TickerRecent PriceAmount InvestedNo. of SharesAnnualized Dividends per ShareTotal Annualized PayoutENB$79.90$45,000563$3.88$2,184.44T$16.49$40,0002,425$1.6736$4,058.48Combined Annualized Payout$6,242.92Monthly Total Payout$520.24

The post How to Use a TFSA to Earn $500 a Month — Completely Tax-Free appeared first on The Motley Fool Canada.

Should you invest $1,000 in Enbridge right now?

Before you buy stock in Enbridge, consider this:

The Motley Fool Canada team has identified what they believe are the top 10 TSX stocks for 2026… and Enbridge wasn’t one of them. The 10 stocks that made the cut could potentially produce monster returns in the coming years.

Consider MercadoLibre, which we first recommended on January 8, 2014 … if you invested $1,000 in the “eBay of Latin America” at the time of our recommendation, you’d have over $16,000!*

Now, it’s worth noting Stock Advisor Canada’s total average return is 91%* – a market-crushing outperformance compared to 87%* for the S&P/TSX Composite Index. Don’t miss out on our top 10 stocks, available when you join our mailing list!

Get the 10 stocks instantly #start_btn6 { background: #0e6d04 none repeat scroll 0 0; color: #fff; font-size: 1.2em; font-family: 'Montserrat', sans-serif; font-weight: 600; height: auto; line-height: 1.2em; margin: 30px 0; max-width: 350px; text-align: center; width: auto; box-shadow: 0 1px 0 rgba(0, 0, 0, 0.5), 0 1px 0 #fff inset, 0 0 2px rgba(0, 0, 0, 0.2); border-radius: 5px; } #start_btn6 a { color: #fff; display: block; padding: 20px; padding-right:1em; padding-left:1em; } #start_btn6 a:hover { background: #FFE300 none repeat scroll 0 0; color: #000; } @media (max-width: 480px) { div#start_btn6 { font-size:1.1em; max-width: 320px;} } margin_bottom_5 { margin-bottom:5px; } margin_top_10 { margin-top:10px; }

* Returns as of June 15th, 2026

More reading

• How Splitting $30,000 Across Three TSX Stocks Could Generate $2,000 in Annual Dividends
• 4 TSX Dividend Stocks That Retirees Might Want On Their Radar
• 4 Top Dividend Stocks Yielding More Than 3.5% to Buy for Passive Income Right Now
• Is TELUS’s Dividend Still Worth Counting on?
• 3 Canadian Stocks That Could Outperform if Growth Stays Soft

Fool contributor Adam Othman has no position in any of the stocks mentioned. The Motley Fool recommends Enbridge and TELUS. The Motley Fool has a disclosure policy.