Many Canadians are always on the lookout for opportunities to grow their wealth while minimizing the impact of taxes. The Tax-Free Savings Account (TFSA) is a powerful financial tool that can help you achieve this goal. In this article, we will explore how to create tax-free passive income through a TFSA, with a particular focus on investing in dividend stocks like Slate Grocery REIT (TSX:SGR.UN).
The power of the TFSA
A TFSA is a versatile investment account that allows you to earn income, grow your investments, and withdraw your funds tax-free. Unlike a Registered Retirement Savings Plan (RRSP), which provides a tax deduction when you contribute but is taxed upon withdrawal, the TFSA allows your investments to grow and generate income without any tax implications.
One of the key strategies for generating passive income within a TFSA is investing in dividend-paying stocks. Dividend stocks pay a portion of their profits to shareholders in the form of dividends. This can provide you with regular income, and when held in a TFSA, these dividends are not subject to taxation.
Slate Grocery REIT as a lucrative solution
Slate Grocery REIT is a real estate investment trust that specializes in grocery-anchored shopping centres in North America. With a dividend yield of 10.91%, it presents an attractive opportunity for those seeking to generate monthly income in their TFSA.
“Slate Grocery REIT’s second-quarter results highlight our team’s continued operational excellence and ability to drive consistent organic growth across the REIT’s portfolio,” said Blair Welch, chief executive officer of Slate Grocery REIT.
In the last quarter, the company achieved record leasing volumes at attractive spreads, driving occupancy and revenue growth. New deals were completed at 23.7% above comparable average in-place rent and non-option renewals at 10.9% above expiring rents. This means that the company is securing higher rental income, which translates into better dividend payouts.
One of the primary indicators of a healthy real estate investment trust (REIT) is its occupancy rate. Slate Grocery REIT reported a 70-basis point gain in occupancy, reaching 93.9% at the close of the quarter. This is a significant achievement, especially since there are no grocery-anchor expiries remaining in the balance of the year. A high occupancy rate ensures a stable stream of rental income, which can be passed on to investors in the form of dividend passive income.
Slate Grocery REIT’s same-property net operating income (NOI) continues to trend positively, increasing by 2.7% on a trailing 12-month basis. This reflects the company’s ability to maintain and grow its income, providing a solid foundation for dividend payouts.
Future growth
Despite a rising interest rate environment, the adjusted funds from operations (AFFO) payout ratio decreased by 1.7% to 96.3% over the comparative period. This is a significant achievement, as it indicates that the company can maintain a healthy dividend payout, even in challenging economic conditions.
The REIT has further strengthened its balance sheet by entering interest rate swap contracts, ensuring that a significant portion of its debt remains fixed. This financial stability is essential for long-term income stability for investors.
Slate Grocery REIT has positioned itself for growth and is actively seeking attractive buying opportunities. The average rent in its portfolio remains below market rates, leaving room for rental growth and increased value. This bodes well for the company’s ability to continue providing attractive dividends to investors.
Bottom line
If you’re an investor with $15,000 today, here is how much you could create in annual passive income from Slate stock.
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY |
| SGR.UN | $11 | 1,363 | $1.17 | $1,594.71 | monthly |
As you can see, this also is produced monthly. So, each month, investors would create $132.89 in passive income each month.
Investing in a Canadian TFSA is an excellent way to generate tax-free passive income. Dividend stocks, such as Slate Grocery REIT, can be a smart choice for investors looking to build a steady income stream. With its impressive results and financial stability, Slate Grocery REIT offers an enticing opportunity for Canadians seeking to create tax-free passive income through their TFSA.
