The rich get richer because of passive income. Active or regular income is what you receive as payment for work or services rendered. Passive income is the stream of income you receive without much effort. You let your money work for you by investing in income-producing stocks.
You can belong to the wealthy class in Canada through quality real estate investment trusts (REITs). Choice Properties (TSX:CHP.UN) and SmartCentres (TSX:SRU.UN) are a pair of must-own REIT stocks if you want a shot at being wealthy for life.
The fascinating part of owning both REIT stocks is that you’re not a physical landlord. You can sleep while your money grows or do other important stuff.
Also, you don’t have to explore other avenues to earn. You’ll be receiving a lifelong, growing passive income from both stocks.
Choice Properties will endow you incredible returns with its 5.5% dividend. If recession or inflation worries you, don’t despair. This REIT stock is surefire protection. The dividends are likewise safe because of its necessity-based tenants.
Loblaw, the largest food retailer in Canada, is Choice Properties’ principal and the anchor tenant in its highly-diversified real estate portfolio. To date, this $4.22 billion REIT owns and manages a total of 726 properties consisting of retail, industrial, office, and residential assets
Nearly 79% of the entire properties are Loblaw stores. You’ll assure yourself of growing passive income, as Choice Properties is practically the king in the rental space with its exceptional occupancy rate of 97.4%. The affiliation and long-time partnership with Loblaw is the main reason why Choice Properties is a quality investment.
SmartCentres is the other REIT that matches the quality of Choice Properties. If Loblaw is the prime tenant of Choice, Walmart is the anchor tenant of SmartCentres.
This $5.34 billion REIT is also a perfect hedge against inflation and defense versus recession. Aside from the Walmart-anchored tenants, value-oriented retailers and prominent national and regional names are among the tenants. SmartCentres generate recurring and stable cash flows even in a slowing economy.
This pre-eminent real estate stock has a slightly higher yield of 5.85%. A $25,000 investment will pay you back with a $1,462.50 annual passive income. Rich people with $500,000 today can double their wealth in less than 12.5 years.
In short, the principle of compounding will take effect the longer you hold SmartCentres and keep reinvesting the dividends.
Importance of passive income
Choice Properties and SmartCentres are the undisputed dividend monsters in the real estate space. Both REITs are financially healthy and strong because of the high-profile tenants.
An equal $10,000 investment in each stock can automatically result in a $1,135 passive income. In the beginning, you might find the return very little. But as time goes by, you’ll realize that you’re building the foundation for wealth.
You can no longer overlook the importance of passive income if you know that there are quality REITs that can deliver a lifelong of growing passive income.
Billionaire Warren Buffett defines passive income this way: “If you don’t find a way to make money while you sleep, you will work until you die.”
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Fool contributor Christopher Liew has no position in any of the stocks mentioned.