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Retired TFSA Investors: 1 Safe REIT for Big Passive Income

As a retiree, it’s just plain reckless to be chasing yield with little consideration for the fundamentals of the business. It’s not just a lazy practice; it’s one that could seriously hurt your TFSA at a time when you may not be able to recover.

Your goal shouldn’t be to maximize your upfront yield today; it should be to get a balance of upfront yield with long-term income growth while minimizing the risk of principal loss. You’ve already checked out of the workforce, and let’s keep it that way.

Killam Properties REIT (TSX:KMP.UN) is one REIT that I think is the perfect combination of safety, growth, and upfront yield. The name yields 3.4%, which pales in comparison to most other REITs, but when you consider Killam’s above-average growth rate and the capital gains potential, the REIT becomes a must-own for retirees who still desire to grow their wealth while still being able to collect a monthly cheque.

For those unfamiliar with Killam, it’s a residential REIT that owns and operates property located on the Atlantic coast. Shares of the REIT have been roaring over the past few years, and investors who’d bought on my recommendation in 2017 have made a killing. In just over two years, Killam shares have soared over 55% thanks mainly to an exceptional management team that’s been driving operational efficiencies while keeping its growth pipeline full of low-risk projects that aim to grow the REIT’s AFFO at an above-average rate.

Smart acquisitions and efficiencies have been Killam’s secret to growing like a stock in the lower-growth world of REITs. I think the name deserves a colossal premium, which still doesn’t exist even after the multi-year rally in shares.

Killam is a buy, not only for retirees but for those investors who want to tilt the risk/reward trade-off in their favour. While Atlantic Canada isn’t exactly what you’d consider a “sexy” part of the Canadian housing market, it’s less exposed to the excessive froth that’s caused some to place bets against it.

Stay hungry. Stay Foolish.

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Fool contributor Joey Frenette has no position in any of the stocks mentioned.

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