A $10,000 Tax-Free Savings Account (TFSA) might not sound like enough to generate meaningful passive income, but you’d be surprised how quickly it can start working for you when it’s invested in the right businesses.
Your goal shouldn’t be to get rich overnight or chase the highest-yielding stocks on the market. Ideally, you should try to build a portfolio that produces reliable income today while still giving your capital room to grow over time. That’s why I prefer companies with sustainable dividends, healthy cash flow, and business fundamentals that continue moving in the right direction.
In this article, I’ll show how I’d invest $10,000 in TFSA savings in monthly dividend stocks to generate about $35 a month in tax-free income.
Surge Energy stock
If you’re looking for a dividend stock that can deliver both tax-free income and growth, Surge Energy (TSX:SGY) could be a great stock to start with.
This Canadian energy producer focuses on developing light and medium crude oil assets across Alberta and Saskatchewan. After climbing 41% so far this year, its shares recently traded at $9.71 per share, giving the company a market cap of $962 million. On top of that, it offers investors a monthly dividend that works out to an attractive annualized yield of 5.2%.
The strong share price performance reflects improving operations and growing confidence in the company’s outlook. During the first quarter, its production increased 1% year-over-year (YoY) to 23,893 barrels of oil equivalent per day, coming in ahead of management’s expectations. Although the company’s adjusted funds flow slipped 11% YoY because of lower realized oil prices and weaker operating netbacks, free cash flow still rose 2% from a year ago as capital spending declined 18%.
More recently, Surge strengthened its outlook by increasing its 2026 exit production guidance by more than 4% to 24,000 barrels of oil equivalent per day. The company also raised its capital budget to $175 million to drill eight additional wells and expand its waterflood program.
Those investments should support continued production growth while also helping fund the company’s $0.52 annual dividend, ongoing share buybacks, and further debt reduction. Put it all together, and Surge Energy looks like an attractive choice for TFSA investors seeking monthly income with meaningful long-term growth potential.
Northland Power stock
Another stock worth considering for this TFSA strategy is Northland Power (TSX:NPI), which could add dependable monthly income while expanding its renewable energy business.
The company owns a diversified portfolio of offshore wind, onshore wind, solar, natural gas, utility, and battery energy storage assets. After climbing 22% year to date, its shares now trade at $21.72 per share with a market cap of about $5.7 billion. Income investors will also appreciate its 3.3% annualized dividend yield, with monthly payouts.
In the first quarter, Northland’s revenue jumped 16% YoY, while its net profit climbed 45%. Higher offshore wind production, pre-completion revenue from the Hai Long project, and contributions from the Oneida energy storage facility helped drive those gains.
Moreover, its Jurassic battery energy storage project is expected to enter commercial operations in late 2026, which should expand its long-term revenue base and support future cash flow growth.
Taken together, Northland Power combines dependable monthly income with a pipeline of large growth projects that could support future earnings.
How much could $10,000 generate?
A $5,000 investment in Surge Energy with its 5.2% annualized dividend yield could generate about $260 in annual dividends. Another $5,000 invested in Northland Power with its 3.3% annualized dividend yield could produce roughly $165 each year. Combined, that’s about $425 in annual dividend income, or around $35 every month, all inside a TFSA where eligible dividends and investment gains can grow tax-free.
And if you reinvest those monthly payouts and keep adding new TFSA contributions over time, you could steadily increase your future passive income.