Want $301 in Super-Safe Monthly Dividend Income? Invest $20,000 in These 2 Ultra-High-Yield Stocks

Having ultra-high-yield while ensuring dividends are safe is a rare combination. High yields are a sign of risk. But if the market overlooked the dividend safety and oversold a fundamentally strong stock over broader economic fears, you can find the combination of high yield and safe dividends. Such stocks are called value stocks, as the market has undervalued them. And this opportunity doesn’t last for a long time. Hence, you will see value investors like Warren Buffett on a buying spree when they find a valuable stock.

Two super-safe dividend stocks that pay monthly income

Monthly dividends are common among real estate investment trusts, or REITs, as they transfer their monthly rent to unitholders. As they are trusts, they have to distribute most of the income earned to their unitholders to enjoy the benefit of not paying taxes. Hence, their dividends are called distributions and are a combination of rental income and capital gain from the sale of property.

CT REIT

CT REIT (TSX: CRT.UN) is one of the most resilient and safe REITs as it has the protection of Canadian Tire. Retail REITs enjoy a higher rental income. CT REIT need not worry about finding a tenant as it has the first right to buy a property that Canadian Tire is interested in. The REIT acquires, develops, and intensifies Canadian Tire stores and benefits from higher rent. The retailer gets to deduct rent as a taxable expense and earn it as a distribution from the REIT.

You can benefit from this arrangement between CT REIT and Canadian Tire and enjoy a distribution that grows by 3% annually. The correction in the real estate market has put all REITs at a discount. CT REIT unit price is trading at a 14% discount from its normal trading price of $17. You can lock in a 6.4% yield if you invest now.

Slate Grocery REIT

Slate Grocery REIT (TSX: SGR.UN) is another resilient REIT since it is operating in an undersupplied market. Its tenants are largely grocers, which are sticky. The grocery business is unaffected by the economic cycles. Also, grocers attract other retailers to nearby stores, giving Slate Grocery REIT the advantage of higher occupancy in all economic cycles.

As for its payout ratio, it pays 80% of the funds from operations as distribution. The REIT is renewing leases at 10% more rent without losing tenants. The management is confident it can continue to grow its lease as the REIT’s rent is lower than others in that area.

The U.S. Fed’s delay in cutting interest rates has kept the REIT’s unit price 27% below its normal trading price of $16. You can lock in a 10% yield if you buy now.

Since it is a rare opportunity to buy the dip, consider investing a lump sum amount to get more value from the lower price.

Invest $20,000 in these stocks for $301 in monthly dividend

If you invest $10,000 in each of the two REITs, you can start earning $136.2 in monthly dividends from September onwards. Here’s how.

Trading at $14.4, a $10,000 investment can buy 694 units of CT REIT. The REIT pays $0.0771 per unit in monthly distribution, and 694 units can earn you $214 in dividends for the remainder of 2024.

For Slate Grocery REIT, a $10,000 investment can buy you 840 units, each unit paying $0.09763 in distribution per month. This distribution changes depending on the exchange rate since the REIT originally pays distribution in U.S. dollars. The 840 units can pay you $82 in monthly payouts and $328 for the remainder of the year.   

The $544 dividend is only for the remaining four months of 2024. But if you reinvest these dividends and keep buying more units of these REITs, your passive income can compound to $301.55 per month by 2034.