Retired Investors: This REIT Stock Provides Stable and Predictable Income

Retired and looking for reliable long-term income? Discover why CT Real Estate Investment Trust (TSX:CRT.UN) is the perfect stock for any retirement portfolio.

| More on:
Happy Retirement” on a road

Image source: Getty Images

Real estate stocks, commonly referred to as REITs, are supposedly a great way to generate stable and predictable income. In reality, that’s not always the case.

Take Slate Office REIT, for example. It had been paying a $0.0625-per-share monthly dividend for years. In March, the payout was slashed by 50%.

However, CT REIT (TSX:CRT.UN) has paid out a reliable dividend for more than five years. Cash flows are expected to continue growing the payout for years to come. And based on its unique business model, there’s little risk of a cut.

Here’s why CT should be a core holding for any retirement account.

Put your eggs in this basket

They say not to put all of your eggs into one basket. Famed investor Warren Buffett disagrees. He says to put all of your eggs into one basket and to watch that basket carefully.

CT has adopted Buffett’s approach in terms of customer concentration.

Other REITs focus on leasing out their properties to a variety of clients, sometimes numbering in the thousands. This creates a complex lease book full of churn and overlapping contracts. A downturn in a single sector, for example, can cause dozens of customers to flee, pushing occupancy rates lower.

These phenomena — which are more common than many REIT investors admit — often result in a dividend cut.

CT has sidestepped this issue by developing its properties around a single primary client: Canadian Tire (TSX:CTC.A).

With more than 500 locations, Canadian Tire is one of Canada’s leading department stores. Since 1995, its stock price has increased by more than 1,000%. It has a bullet-proof balance sheet and a proven ability to both grow and retain existing storefronts.

CT owns more than 300 properties comprising 26 million square feet, nearly all of which are anchored by a Canadian Tire store. The partnership is so tight, in fact, that Canadian Tire is CT’s largest investor, so you can set aside worries that the company will ditch its current landlord.

Here’s why this stock wins

CT began trading in 2013. It’s never missed a dividend payment since. Today, the yield is up to 5.4%.

Over the last five years, the company has increased its net asset value by 7.1% annually. This has allowed it to boost the dividend five times in five years.

With nearly a century-long history, Canadian Tire is about as good of a tenant as it gets. Canadian Tire has nearly 100% brand awareness in Canada, and more than 80% of Canadians shop there every year.

The average contract has roughly 11 years left, all of which should be renewed as long as the underlying stores are still in business.

Going forward, it’s incredibly likely that CT will keep its strategy simple and straightforward: continue making long-term leases to its biggest customer and shareholder, all of which include built-in escalators to ensure the contract pricing remains competitive with the market.

With a small $1.4 billion market cap and a hyper-specialized business model, CT doesn’t get a lot of attention, but for a retirement portfolio, this stock is as good as it gets.

Not only do you receive consistent, recession-resistant income, but if the stock is held is an RRSP or TFSA account, your dividends accrue tax-free.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Ryan Vanzo has no position in any stocks mentioned.

More on Dividend Stocks

Woman has an idea
Dividend Stocks

2 Blue-Chip Stocks Every New Canadian Investor Should Own

Canadian blue-chip stocks such as Toronto-Dominion Bank have the ability to deliver market-beating returns to investors in 2022 and beyond.

Read more »

Businessman holding tablet and showing a growing virtual hologram of statistics, graph and chart with arrow up on dark background. Stock market. Business growth, planning and strategy concept
Dividend Stocks

3 Canadian Dividend Stocks to Buy Hand Over Fist

These three Canadian dividend stocks each offer a unique opportunity, making them some of the best investments to buy at…

Read more »

A person builds a rock tower on a beach.
Dividend Stocks

Retirement Wealth: 2 Oversold Canadian Stocks to Buy Now and Own for Decades

These industry-leading dividend stocks look cheap right now and have increased their distributions annually for decades.

Read more »

Tired or stressed businessman sitting on the walkway in panic digital stock market financial background
Dividend Stocks

2 of the Safest TSX Stocks Right Now

The stock market is heading towards a crash. Investors are seeking the safety of dividends, and these two stocks provide…

Read more »

Payday ringed on a calendar
Dividend Stocks

Want Monthly Passive Income? Try These TSX Dividend Payers

In need of extra cash? These dividend stocks offer passive income each month, and you can pick them up cheap…

Read more »

Various Canadian dollars in gray pants pocket
Dividend Stocks

Want Safe Passive Income? Here Are 2 TSX Dividend Aristocrats for New Investors

Need some safe passive income? TSX Dividend Aristocrats like Fortis (TSX:FTS) are ideal stocks for new investors to hold in…

Read more »

grow dividends
Dividend Stocks

2 Cheap TSX Dividend Stocks to Buy Now

These top TSX dividend stocks now offer 6% yields.

Read more »

Piggy bank next to a financial report
Bank Stocks

Got $500? Create Passive Income of $500 in Just 33 Years

Only have a bit of cash to invest? By investing in the right stock, you could make $500 in annual…

Read more »