Canadian investors can use registered accounts such as the Tax-Free Savings Account (TFSA) to create a stable stream of recurring income. The contribution room for the TFSA rose to $7,000 in 2024, increasing the cumulative contribution limit to $95,000. As any returns in the TFSA are exempt from Canada Revenue Agency taxes, the account can be used to hold a variety of asset classes, such as bonds, stocks, mutual funds, and exchange-traded funds.

So, let’s see how you can use the TFSA to earn $250 per month in tax-free passive income by investing in monthly TSX dividend stocks.

Mullen Group stock

Valued at $1.14 billion by market cap, Mullen Group (TSX:MTL) provides a range of trucking and logistics services in Canada and the United States. With an annual payout of $0.72 per share, Mullen Group offers a tasty dividend yield of 5.5%.

During its first-quarter (Q1) results, Mullen Group explained that the economy is slowing, and it witnessed a softening in demand across business segments. Further, weak demand generally translates to lower capital investment as major project construction activities get delayed.

However, Mullen Group’s diversified business model helps it mitigate rapid changes in the market. It also continues to grow via acquisitions, which added more than $20 million in sales in the March quarter.

Mullen Group reported revenue of $462.6 million in Q1 of 2024, down 7% year over year. Comparatively, its operating income before depreciation and amortization fell 14% to $66.2 million, while adjusted net income narrowed by 28% to $22.4 million, or $0.25 per share.

However, its operating cash flow stood at $38.6 million, or $0.44 per share, while its dividends in the quarter totalled $0.18 per share. Thus, Mullen Group has enough flexibility to invest in organic growth and maintain its dividend payout going forward.

Priced at 11 times forward earnings, Mullen Group is quite cheap and trades at a discount of 40% to consensus price target estimates.

Sienna Senior Living stock

Valued at $1.06 billion by market cap, Sienna Senior Living (TSX:SIA) pays shareholders an annual dividend of $0.94 per share, indicating a yield of 6.4%. Under its Aspira retirement brand, Sienna Senior Living offers a range of senior living options, including independent living, assisted living, and memory care.

In Q1 of 2024, Sienna continued to grow its net operating income in segments such as long-term care and retirement for the fifth consecutive quarter. Its same property net operating income rose by 76% to $64 million in Q1, while it ended the quarter with an adjusted funds flow per share of $0.485, indicating a payout ratio of 48.2%.

Priced at 24.8 times forward earnings, Sienna Senior Living stock trades at a discount of over 10% to consensus price target estimates.

The Foolish takeaway

To earn $250 per month in a TFSA, you need to invest around $50,800 equally distributed in the two stocks. If the dividends grow by 5% annually, you should double the dividend payout in the next 14 years. Investors should identify other such dividend stocks with strong balance sheets and diversify their portfolios further.