Rising inflation hurts the pockets of consumers. You feel it personally when you stop buying something you’ve been buying regularly because the price has risen considerably. Losing buying power is the direct impact of persistent inflation. However, you can protect or preserve it through dividend investing.
Canada’s average annual inflation rate dropped sharply to 3.9% in 2023 from a 40-year high of 6.8% in 2022. However, the Bank of Canada isn’t ready to cut rates because headline inflation is still higher than its 2% target. If the higher-for-longer interest rate scenario extends, it makes sense to invest in ultra-high-yield stocks.
The Canadian Imperial Bank of Commerce (TSX:CM) and CT Real Estate Investment Trust (TSX:CRT.UN) are generous dividend payers but are safer options in 2024. Besides the high yields, both companies have raised payouts for at least 10 consecutive years. Hold them in a tax-advantaged or tax-sheltered investment account for tax-free money growth.
Quarterly income streams
Dividend safety is never in doubt when you invest in Canada’s Big Banks. All the Big Five have been paying dividends for more than 100 years. CIBC, the fifth-largest, started sharing a portion of its profits with shareholders in 1868 and has raised dividends yearly in the last 12 years.
If you invest today ($60.52 per share), the $56.4 billion bank pays a hefty 5.93% dividend. Assuming you can purchase 314 shares ($19,003.28), you’d generate $300.73 in quarterly passive income. Like its sector peers, CIBC is a bedrock of stability. It has kept the quarterly payouts steady in the face of economic downturns, including COVID-19 in 2000 and the financial crisis in 2008.
Monthly dividends
Real estate investment trusts (REITs) are the next-best alternatives to owning real estate. The monthly dividends or distributions replace rental income. CT REIT is one of Canada’s largest commercial property landlords. Also, having Canadian Tire Corporation as the controlling unitholder and anchor tenant is a competitive advantage.
The $3.4 billion REIT owns and operates income-producing retail, industrial, and mixed-use commercial properties. At $14.38 per share, the dividend offer is 6.33%. Owning 1,320 shares today ($18,981.60 investment) translates to $100.13 in monthly passive income. The amount should increase yearly with dividend hikes.
As of September 30, 2023, CT REIT’s portfolio occupancy rate is 99.91%, and lead tenant Canadian Tire occupies 91.9% of the total gross leasable area (GLA). In the first three quarters of 2023, property revenue and net operating income (NOI) increased 3.8% and 4.6% year over year respectively to $412.8 million and $327.4 million.
According to its President and CEO, Kevin Salsberg, the 3.2% and 3.6% year-over-year increases in property revenue and NOI in Q3 2023 versus Q3 2022, respectively, represents another quarter of stability and consistency for the REIT. Salsberg adds that the weighted average lease term of 8.5 years is among the longest in the industry.
Salsberg assures unitholders of reliable, durable and growing results over time. CT REIT went public on October 23, 2013, and has declared dividend hikes every year since.
Exceptions to the rule
The warning that your money is at higher risk when investing in assets with higher returns is usually valid. However, CIBC and CT REIT are exceptions, given their payment histories and dividend growth streaks.
