Buy 2,096 Shares of This Top Dividend Stock for $218/Month in Passive Income 

Dividend stocks can provide some stability in these uncertain times where a looming trade war raises fears of rising prices.

| More on:
Canadian dollars are printed

Source: Getty Images

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.

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 PriceYearAnnual InvestmentCT REIT DRIP SharesCT REIT Share countCT REIT Dividend per share (3% CAGR)Total dividend
$14.232024-25$10,000.00702.7703.0$0.93$216.81
$16.502025-26$1,216.8173.7776.7$0.96$744.04
$16.502026-27$1,744.04105.7882.4$0.99$870.65
$16.502025-27$1,870.65113.4995.8$1.02$1,011.99
$16.502026-28$2,011.99121.91117.8$1.05$1,169.98
$16.502025-28$2,169.98131.51249.3$1.08$1,346.87
$16.502026-29$2,346.87142.21391.5$1.11$1,545.22
$16.502025-29$2,545.22154.31545.8$1.14$1,768.02
$16.502026-30$2,768.02167.81713.5$1.18$2,018.69
$16.502025-30$3,018.69183.01896.5$1.21$2,301.25
$16.502026-31$3,301.25200.12096.5$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.

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

woman analyze data
Dividend Stocks

The Smartest Dividend Stocks to Buy With $1,000 Right Now

Do you have some cash to invest but want to earn a safe, low-risk dividend return? These dividend stocks are…

Read more »

An investor uses a tablet
Dividend Stocks

5 Canadian Dividend Stocks I Think Everyone Should Own

These Canadian stocks have a solid track record of dividend growth and offer compelling yields near their current market price.

Read more »

calculate and analyze stock
Dividend Stocks

This 4.4% Dividend Stock Pays Cash Every Single Month

This high-quality Canadian dividend stock offers an attractive yield and plenty of long-term growth potential.

Read more »

edit Safe pig, protect money
Dividend Stocks

3 TSX Dividend Aristocrats That Can Weather Any Economic Storm

Market volatility has investors wondering which stocks can withstand an economic storm. Here are three to consider today.

Read more »

people relax on mountain ledge
Dividend Stocks

Top Canadian Stocks to Buy for Passive Income 

Are you building a passive income portfolio that can beat inflation and provide higher purchasing power? You could consider buying…

Read more »

voice-recognition-talking-to-a-smartphone
Dividend Stocks

1 Magnificent Canadian Dividend Stock Down 40 Percent to Buy and Hold Forever

This magnificent Canadian dividend stock trades at a huge discount, offers stellar growth, and pays one of the best yields…

Read more »

A plant grows from coins.
Dividend Stocks

Top Canadian Stocks to Buy for Dividend Growth

Dividend growth stocks can be a good option to build a passive income that beats inflation and improves buying power.

Read more »

Concept of multiple streams of income
Top TSX Stocks

The Best Stocks to Invest $1,000 in Right Now

Here are some of the best stocks that every investor should own today to generate massive income and strong growth…

Read more »