1 Magnificent Canadian Dividend Stock Down 6.2% to Buy and Hold Forever 

A magnificent dividend stock has slipped 6.2% year to date, creating an opportune time to buy and make for the past 12-month investment miss.

| More on:
Young woman sat at laptop by a window

Image source: Getty Images.

Can you name an asset you bought for investment purposes but have no plans to sell it in your lifetime? The most obvious answer is property. A property can give you rental income that will keep growing as the economy grows and income increases. Many invest in property for their retirement income. While no stock can replace a physical property, a magnificent Canadian dividend stock can give monthly passive income

A magnificent dividend stock is down 6.2%

CT REIT (TSX:CRT.UN) stock is down 6.2% year to date as the Canadian property market is seeing a correction. The 5% interest rate has made borrowing expensive and slowed the house-buying activity. While some markets are on the road to recovery, some are still settling down. This decline in property prices reduced the fair market value of CT REIT’s property portfolio. The portfolio comprises retail stores mostly occupied by the parent company, Canadian Tire

Hence, any decision around interest rate impacts CT REIT’s stock price. But this dip is an opportune time to buy and hold this magnificent dividend stock. Here’s why.

Three reasons to buy and hold this dividend stock forever 

We started with the topic of buying a property you will never sell because the investment objective is to earn rental income. 

When it comes to rent, a retail store earns higher rent than a housing property. A landlord can earn 3-5% of their property value as rent, depending on the location and market conditions. But CT REIT adds the stock element. Hence, you can use the current dip in the stock price to lock in a yield of 6.57%. 

You can earn such a high distribution yield without legal and maintenance work. CT REIT takes care of these expenses and even develops and expands stores to earn a higher rent. 

Lastly, having a strong tenant like Canadian Tire reduces the risk of delayed rent or lower occupancy. CT REIT enjoys 99.1% occupancy with a 1.5% increase in annual rent. 

How to build your rental income with this dividend stock

If you are buying a property for investment, you will have to shell out at least half a million, which is the life savings of many Canadians. And even after you buy the property, you have to spend on interiors and building maintenance. But with CT REIT, you can start investing $500 a month and get a monthly payout from next month onwards.  

Now, the REIT also offers a dividend-reinvestment plan (DRIP) wherein it reinvests your monthly payout to buy more units of CT REIT. And the REIT will continue to increase distribution by 3%, adjusting your income for inflation. 

MonthCT REIT Distribution per shareCT REIT stock price on 1st of every monthTotal InvestmentNumber of sharesDividend income
Jan-24$0.07485$14.65$528.31414.34$31.01
Nov-23$0.07485$13.62$525.43378.27$28.31
Oct-23$0.07485$12.65$522.34339.70$25.43
Sep-23$0.07485$13.69$519.50298.40$22.34
Aug-23$0.07485$14.56$516.84260.46$19.50
Jul-23$0.07485$15.23$514.31224.96$16.84
Jun-23$0.07485$15.09$511.38191.19$14.31
May-23$0.07232$15.02$508.93157.30$11.38
Apr-23$0.07232$16.09$506.65123.42$8.93
Mar-23$0.07232$16.03$504.3791.93$6.65
Feb-23$0.07232$16.7$502.2060.47$4.37
Jan-23$0.07232$16.45$500.0030.40$2.20
How CT REIT’s DRIP compounds dividend income.

Here’s how compounding works: if you started investing $500 every month in CT REIT’s DRIP, your total investment in a year would be $6,160, and your unit count would be 414 units.

You can make up for the last 12 months by investing $6,000 now when the stock is trading at $13.74. You can buy 437 units with a lower amount and get a monthly payout of $32.71 from April onwards. That is the benefit of buying the dip. 

Investor takeaway 

And when the property price appreciates, so will the unit price of CT REIT. Unlike a property, you can sell only a few units of CT REIT from your portfolio if you need a large amount. And the units are easier to sell than a property. The rental income is taxable, but this dividend income can become tax-free by investing through the Tax-Free Savings Account. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Puja Tayal has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

More on Dividend Stocks

hand using ATM
Dividend Stocks

Should Bank of Nova Scotia or Enbridge Stock Be on Your Buy List Today?

These TSX dividend stocks trade way below their 2022 highs. Is one now undervalued?

Read more »

A meter measures energy use.
Dividend Stocks

Here’s Why Canadian Utilities Is a No-Brainer Dividend Stock

Canadian Utilities stock is down 23% in the last year. Even if it wasn’t down, it is a dividend stock…

Read more »

edit Business accounting concept, Business man using calculator with computer laptop, budget and loan paper in office.
Dividend Stocks

Got $5,000? Buy and Hold These 3 Value Stocks for Years

These essential and valuable value stocks are the perfect addition to any portfolio, especially if you have $5,000 you want…

Read more »

Growing plant shoots on coins
Dividend Stocks

3 Magnificent Ultra-High-Yield Dividend Stocks That Are Screaming Buys in April

High yield stocks like BCE (TSX:BCE) can add a lot of income to your portfolio.

Read more »

grow money, wealth build
Dividend Stocks

1 Growth Stock Down 24% to Buy Right Now

With this impressive growth stock trading more than 20% off its high, it's the perfect stock to buy right now…

Read more »

Dividend Stocks

What Should Investors Watch in Aecon Stock’s Earnings Report?

Aecon (TSX:ARE) stock has earnings coming out this week, and after disappointing fourth-quarter results, this is what investors should watch.

Read more »

Freight Train
Dividend Stocks

CNR Stock: Can the Top Stock Keep it Up?

CNR (TSX:CNR) stock has had a pretty crazy last few years, but after a strong fourth quarter, can the top…

Read more »

Hand arranging wood block stacking as step stair with arrow up.
Dividend Stocks

3 Stocks Ready for Dividend Hikes in 2024

These top TSX dividend stocks should boost their distributions this year.

Read more »