Canada is walking on thin ice with its neighbour America, on whom it relies to export oil and minerals. The real-time update of the political tensions between the two is visible on the TSX Composite Index. It may just be the start of a year-long talks on trade, immigration, and drugs. With Donald Trump regaining the U.S. presidential office, he could bring some aggressive policy changes that could affect the Canadian dollar, exports, and the overall economy. At times like these, dividend stocks could provide some relief with their stable payouts.
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A top dividend stock to buy amid economic uncertainty
As global trade tensions rise, investors should shift their focus to domestic companies that enjoy strong Canadian demand. Prime Minister Justin Trudeau is pushing the campaign of “Buy Canadian,” which could support local manufacturers.
A trade war with the United States could slow the Canadian economy. BMO Capital Markets expects the Bank of Canada to reduce interest rates to 1.5% in 2025 to boost growth. With interest rates falling, Canada’s real estate sector could see some recovery.
CT REIT (TSX:CRT.UN) could be your defensive dividend play in an uncertain economy. The real estate investment trust (REIT) has Canadian Tire as a tenant and enjoys a 99.4% occupancy rate. The fundamentals of the two companies are entangled. Healthy financials of Canadian Tire lead to healthy distributions by CT REIT.
Canadian Tire sells general merchandise, apparel, footwear, sporting equipment, gasoline, sporting goods activewear, and workwear. It survived the 8% inflation in 2021, when consumer spending shifted to staples. It even survived the pandemic, when lockdowns killed outdoor sports. Canadian Tire is in a healthy position and can sustain a trade war uncertainty.
Meanwhile, CT REIT will enjoy a steady rental income. The REIT has 99.7% interest-only unsecured debt, which means it only pays interest for a certain period. The maturity of this debt is spread over the next six years, giving it financial flexibility to intensify stores, withstand a downturn, and pay debt maturity without impacting dividend payments.
CT REIT has been reducing its dividend payout ratio from 76.8% in 2020 to 73.3% in the third quarter of 2024 while growing dividends between 4.7% and 3.3%. It shows the resilience of the REIT to difficult economic conditions.
Buy 2,096 shares of CT REIT for $218/month in passive income
CT REIT is among the few that annually increase its dividend by 3% in July. It is possible as its arrangement with Canadian Tire allows it to increase rent by 1.5% and intensification projects lead to higher rent. The REIT also offers a dividend-reinvestment plan (DRIP) that reinvests dividend money to buy more income-paying units.
The REIT is trading below its average trading price of $16.5, which means you can buy more units at a discount. A little over $10,000 investment today can buy you 703 CT REIT units at $14.23 per unit. Buying now can get you four-month distributions for the 2024-25 fiscal year. It will be followed by a 3% growth in dividend per share in July 2025.
| CT REIT Stock Price | Year | Annual Investment | CT REIT DRIP Shares | CT REIT Share count | CT REIT Dividend per share (3% CAGR) | Total dividend |
| $14.23 | 2024-25 | $10,000.00 | 702.7 | 703.0 | $0.93 | $216.81 |
| $16.50 | 2025-26 | $1,216.81 | 73.7 | 776.7 | $0.96 | $744.04 |
| $16.50 | 2026-27 | $1,744.04 | 105.7 | 882.4 | $0.99 | $870.65 |
| $16.50 | 2025-27 | $1,870.65 | 113.4 | 995.8 | $1.02 | $1,011.99 |
| $16.50 | 2026-28 | $2,011.99 | 121.9 | 1117.8 | $1.05 | $1,169.98 |
| $16.50 | 2025-28 | $2,169.98 | 131.5 | 1249.3 | $1.08 | $1,346.87 |
| $16.50 | 2026-29 | $2,346.87 | 142.2 | 1391.5 | $1.11 | $1,545.22 |
| $16.50 | 2025-29 | $2,545.22 | 154.3 | 1545.8 | $1.14 | $1,768.02 |
| $16.50 | 2026-30 | $2,768.02 | 167.8 | 1713.5 | $1.18 | $2,018.69 |
| $16.50 | 2025-30 | $3,018.69 | 183.0 | 1896.5 | $1.21 | $2,301.25 |
| $16.50 | 2026-31 | $3,301.25 | 200.1 | 2096.5 | $1.25 | $2,620.35 |
Assuming your dividends buy DRIP shares at a $16.5 share price, you could accumulate 2,096 units by June 2031 and start earning $218 per month in passive income by switching to payout. Within four years, you could get your $10,000 investment back and the passive income going forward would be only profits on investments.
