Need $500 in Passive Income Each Month? These 2 TSX Stocks Are Your Top Bets

Designing your investment portfolio around pre-set personal objectives could make it easier to stick to a long-term investment program. Objectives could include an explicit income target, for example, receiving $500 each month, or $6,000 every year in passive income. Bonds and guaranteed investment certificates now offer good yields and can be incorporated into portfolio design. However, stocks generally offer better long-term growth prospects, on top of regular dividend income.

To receive $500 in passive income every month from your investment portfolio, you may buy TSX dividend stocks that pay regular dividends on a monthly basis.

Ideally, it would be best if you went for monthly-pay dividend stocks with a solid dividend history, and businesses with stable and preferably growing operations, and solid cash flow growth outlooks. Such businesses may have tangible moats that support cash flow growth during your investment horizon so you may enjoy growing dividend income without further capital investments.

The two TSX dividend stocks discussed below could be some of your best bets for monthly passive income generation and future capital growth.

SmartCentres REIT

Real estate investment trusts (REITs) naturally dominate lists of monthly-pay dividend stocks because the entire asset class was designed to efficiently distribute tax-advantaged real estate income to investors. REITs generally distribute income on a monthly basis, and SmartCentres Real Estate Investment Trust (TSX: SRU.UN) is one of the best REITs in its sub-class.

SmartCenters REIT is an open-air shopping mall giant with 174 properties, the majority of which are Walmart-anchored retail assets. This retail anchor reported intense leasing activity with industry-leading (and still rising) occupancy rates of 98% in 2022 supporting positive growth in same-property net operating income.

The trust’s robust development activity that turns highly sought malls into mixed-use properties with growing exposure to residential properties, self-storage, and industrial spaces should support operating income growth, and improve payout coverage going forward.

You can buy units at a 15% discount to their book value today and lock in a very good 7.2% distribution yield over a long-term investment horizon. Major shareholder and Chief Executive Officer Mitchell Goldhar recently acquired 104,000 more units. The billionaire insider knows well to capitalize on value investing opportunities.

The trust pays $0.154 per unit in monthly distributions that should yield a juicy 7.2% annually. To receive $500 in passive income every month, investors can buy 3,247 SmartCentres REIT units for a total consideration of $83,253.08 given today’s price, as summarized below.

Investors could do better by placing REIT investments in tax-advantaged accounts, especially the Tax-Free Savings Account for potentially improved after-tax returns because REIT income distributions are ordinarily taxed at one’s average income tax rates.

Savaria Corp

Savaria Corporation (TSX: SIS) is a global leader in patient mobility and accessibility solutions that pays regular dividends every month to its stock investors. The $1 billion stairlift and elevator maker pays a $0.043 per share monthly dividend that yields 3.3% annually. The company has raised dividends each year for the past 10 years and achieved an 11.2% average annual dividend growth rate over the past five years.

In 2022, Savaria reported impressive performance. This included strong 19.4% year-over-year revenue growth to $789.1 million despite currency headwinds. Most of its sales growth in 2022 was organic (12.7% growth) while a 2021 acquisition of Handicare amplified the stellar results. Net earnings surged 189% year over year to $0.55 per diluted share.

Management expects the company to organically grow revenue by 8–10% in 2023 backed by high order backlogs, cross-selling, and strong demand seen in its Accessibility and Patient Care segments. The company is targeting 8%–10% sales growth each year for the next three years as it strives to reach its $1 billion revenue target by 2025.

Savaria grew sales by more than 120% over the past two years and more than double its adjusted earnings before interest, taxes, depreciation, and amortization (adjusted EBITDA) during the period. Acquisitions could amplify revenue, earnings, and free cash flow growth to support further dividend increases.

To receive $500 a month in passive income, investors may buy 11,628 shares in Savaria Corp for a total consideration of $182,908.44 at today’s SIS stock trading price, as summarized below.