Given the current macroeconomic environment, the stock market might remain volatile and unpredictable this year. Investing in growth-focused stocks can be too risky, as high inflation, increasing interest rates, and geopolitical tensions persist.
However, finding ways to generate more income in this economy is essential. Dividend investing, particularly in monthly dividend-paying stocks, can be an excellent strategy to earn a stable, passive, and monthly income, regardless of market movements.
However, investors must remember that dividends are not a guarantee. To create a stable passive income stream, you must identify stocks with financially healthy underlying businesses capable of supporting regular monthly distributions. To this end, here are two of my top picks for the best Canadian monthly dividend-paying stocks you can consider for your self-directed portfolio.
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CT REIT
When it comes to monthly passive income, real estate investing can be an excellent option to consider. With real estate investment trusts (REITs) like CT REIT (TSX: CRT.UN), you have the opportunity to become a lazy landlord. It means you can gain exposure to the real estate market and enjoy monthly returns on your investment but without the role and responsibilities of a landlord.
The $1.73 billion market capitalization trust can be an excellent monthly dividend stock, because it consistently generates a ton of monthly cash flow from rent. In turn, the REIT pays out a portion of its income to investors in monthly distributions.
CT REIT is a retail REIT, and its majority owner is Canadian Tire. Around 90% of CT REIT’s income comes through Canadian Tire stores, virtually guaranteeing strong cash flows and revenue generation for the trust.
CT REIT has not had a single quarter since it began trading on the TSX where it has not seen revenues grow. With several more projects in the development pipeline, it appears to be an attractive monthly dividend income asset to consider with long-term growth potential. As of this writing, it trades for $15.98 per share, boasting a juicy 5.43% annualized dividend yield it pays out on a monthly schedule.
TransAlta Renewables
TransAlta Renewables (TSX: RNW) may not be a real estate stock that can turn you into a lazy landlord, but it is a monthly dividend stock you can consider for your portfolio.
As the world increasingly shifts toward renewable energy, clean energy stocks like TransAlta Renewables will become more valuable. The $3.35 billion market capitalization renewable energy company owns and operates around 48 renewable energy facilities worldwide.
The renewable energy segment has not been enjoying the best time of late. Higher interest rates make borrowing more expensive. With weakness in the renewable energy space combined with soft quarterly performances, TransAlta Renewables stock is down by 35.57% from its 52-week high on the stock market.
Its recent-most quarterly earnings report did not bring good news. Its power production declined by 55 gigawatt hours, free cash flow declined by $29 million, and its earnings before interest, taxes, depreciation, and amortization fell by $7 million.
Despite this near-term volatility, it can be an excellent long-term addition to your portfolio. The company has signed several long-term power-purchase agreements, virtually guaranteeing stable and predictable income for the next 12 years.
Additionally, it plans to put several renewable energy assets in service this year, increasing its cash flow. As of this writing, it trades for $12.53 per share and boasts a juicy 7.50% annualized dividend yield that it pays out on a monthly schedule.
Foolish takeaway
Where CT REIT offers a greater degree of stability in its share prices, TransAlta Renewables stock offers significant capital gains potential. Both TSX stocks offer stable monthly dividends. If you want to create a monthly dividend income portfolio, CT REIT and TransAlta Renewables stock can be excellent picks to begin building it.
