How $250 per Month Can Create $193.20 in Annual Dividend Income

Canadian investors may not realize just how much they can bring in by putting even a little aside each month. For instance, putting aside $250 each month would end the year with $3,000 in the bank! That’s absolutely excellent. But there’s no reason to stop there.

Which is likely why you’re here at the Motley Fool in the first place. It’s what to do with that money that can really count. So let’s get into why putting that $250 each month into stock investments can create stellar income. Not just from returns, but dividends as well.

First, where to invest

H&R Real Estate Investment Trust (TSX: HR.UN) stands out as a solid investment option for those seeking stability and growth in the real estate sector. Its diversified and high-quality portfolio, strategic repositioning, strong dividend yield, and positive analyst outlook make it a compelling choice. By investing regularly, investors can build a significant position in H&R REIT, benefiting from its income potential and future growth prospects.

H&R REIT boasts a diversified portfolio that includes residential, industrial, office, and retail properties across North America. This diversity helps mitigate risk and ensures stable revenue streams from multiple real estate sectors. As of December 31, 2023, H&R REIT had total assets of approximately $10.8 billion, comprising over 26.9 million square feet of leasable space.

H&R REIT has been actively repositioning its portfolio to focus more on residential and industrial properties, which are seen as growth-oriented segments. The trust has been selling off office and retail properties to streamline operations and enhance long-term value for unitholders. Recent transactions include the sale of four Canadian retail properties for $68 million and an office property in Ottawa for $277 million.

Despite a challenging economic environment, H&R REIT has demonstrated resilience. In the first quarter of 2024, the trust reported revenues of $209.5 million and an Adjusted Funds From Operations (AFFO) of $0.246 per share. The trust offers a compelling dividend yield of approximately 6.42%, with annual distributions of $0.60 per unit. This yield is among the highest in the REIT sector, providing a steady income stream for investors.

What to do with that $250

Investors can take advantage of H&R REIT’s stability and growth potential by investing consistently over time. A strategy of investing $250 per month can accumulate a significant number of units, benefiting from dollar-cost averaging. Over a year, this would amount to $3,000 invested as mentioned.

So, assuming the current price of HR.UN is around $10 per unit and it remains relatively stable, investors could acquire 25 units per month. That would bring it to 300 units per year. That would turn into $180 annually! But then, add in more share increases. These haven’t been stellar,  but even just a 2% increase would add even more income.

Investors would now have $62.22 in returns and $193.20 in dividend income! This totals $255.42 in passive income for the year! Keep it going and you’ll have more saved than you could imagine.