Do you want to make some tax-free income? Your Tax-Free Savings Account (TFSA) can help! One way is by investing in stocks that pay dividends. These are like little cash bonuses the company gives you. Let’s take a look at why a company like Granite Real Estate Investment Trust (TSX: GRT.UN) could be a strong choice.
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Why Granite?
Granite REIT is a Canadian TSX stock that deals with industrial properties. Think big warehouses and distribution centres in North America and Europe. These places are super important for getting goods where they need to go. With more online shopping and global trade, there’s a big need for these kinds of properties. This puts Granite REIT in a good spot.
As of writing, Granite REIT is trading at $57.60. It has a forward annual dividend yield of 5.5%. That means for every unit you own, you’re expected to get $3.40 in dividends over the next year. Granite REIT has a history of paying dividends consistently. This shows it has a stable cash flow and likes to give back to the people who own it.
Looking back at 2024, Granite REIT did pretty well. Its funds from operations (FFO) were $343.9 million, or $5.44 per unit. That’s up from the year before! FFO is like the cash flow a REIT has from its operations. When FFO grows, it’s a good sign that the real estate investment trust (REIT) is making more money, which can support those dividend payments and maybe even lead to bigger ones in the future.
Creating passive income
Granite REIT’s payout ratio is around 57.55%. This number tells you how much of its earnings it’s giving out as dividends. A ratio like this suggests it’s not giving out too much, leaving enough money for the company to grow and run things smoothly. This balance is a good sign for the reliability of future dividend payments.
The fact that Granite REIT has properties in different areas and focuses on industrial spaces gives it some stability and potential for growth. As online shopping grows and getting goods around efficiently becomes more important, the demand for industrial real estate is likely to stay strong. This benefits companies like Granite REIT.
Let’s say you put $15,000 into Granite REIT at $57.60 per unit. Here’s how much that could create for you in dividend income alone.
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY | TOTAL INVESTMENT |
| GRT.UN | $57.60 | 260 | $3.40 | $884 | monthly | $15,000 |
Bottom line
That’s right, you could create passive income of $884 annually, coming out as $73.67 monthly. Now, it’s important to remember that all investments have some risks. For REITs, one risk is that changes in interest rates can affect them. Also, if the economy slows down, companies might need less warehouse space, which could impact Granite REIT’s income. However, Granite REIT’s good financial performance and the types of properties it owns help to reduce some of these risks.
Before you jump into any investment, make sure you do your homework and think about your own financial goals and how much risk you’re comfortable with. Talking to a financial advisor can also give you personalized advice for your investment strategy. By carefully choosing investments like Granite REIT, you can work towards building a solid portfolio that gives you reliable, tax-free passive income through your TFSA.
