With heightened volatility in markets across the world as a result of the ongoing trade wars, it’s more important than ever to ensure the stocks you own are safe and reliable. That’s why high-quality dividend stocks are some of the best investments to make in your Tax-Free Savings Account (TFSA).
When it comes to your TFSA, not only is your contribution room limited, but any capital gains or dividend income you earn is tax-free, making it essential to take advantage of the compounding potential that it offers.
That’s why CT REIT (TSX: CRT.UN) is one of the best and most underrated investments you can make for your TFSA today.
It’s a high-quality dividend stock that offers both reliable monthly income and a tonne of long-term growth potential.
So, with its yield now up to 6.4% and its stock price still trading below $15 per unit, here’s why CT REIT deserves serious consideration in your TFSA portfolio.
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What makes CT REIT such a reliable investment?
The biggest factor that makes CT REIT such a dependable stock is the strength of its tenant base and its long-term lease structure.
In fact, roughly 90% of the REIT’s rent comes directly from Canadian Tire, which is also its majority owner.
Canadian Tire is one of the top retail stocks in the country. Furthermore, in addition to Canadian Tire being a highly resilient and reliable tenant, CT REIT’s leases are structured on a long-term basis, with most having built-in rent escalations that consistently grow its rental income.
This gives the dividend stock a tonne of predictability and allows investors to have confidence in the monthly distributions it returns to unitholders.
In fact, since going public in 2013, the real estate investment trust (REIT) has steadily and consistently grown its cash flow, which has allowed it to increase its distribution every single year since it debuted on the TSX.
Furthermore, its payout ratio continues to hover around 75% of adjusted funds from operations (AFFO), a healthy and sustainable range for a retail-focused REIT. At the end of 2024, its occupancy rate remained at an impressive 99.4%, showing the reliability of its rental revenue.
Why is CT REIT one of the best dividend stocks to buy in your TFSA?
What’s most impressive about CT REIT, though, is that despite being such a dependable and low-risk stock, it still offers long-term growth potential. In fact, at the end of 2024, the REIT had a pipeline of over $500 million in committed and potential development projects.
Furthermore, it continues to acquire and develop properties in high-traffic and strategic locations, often tailored to Canadian Tire’s needs.
Plus, the REIT’s goal is to achieve an AFFO per unit growth rate of 2% to 3% annually over the long term, which may not sound massive. However, for a low-volatility, defensive REIT that already pays such an attractive yield, it’s an ideal target and one that sets CT REIT up as a perfect dividend stock for conservative investors.
Why now is the time to buy
CT REIT has always been a reliable investment, but it has become even more attractive today with its stock trading so cheaply. Its current price-to-AFFO ratio is just 11.5 times, which is below its five-year average of roughly 13.4 times, making this an ideal time to gain exposure.
Plus, its current yield of 6.4% is well above its five-year average yield of 5.7%, and with the REIT increasing its distribution annually, investors who buy today can lock in an above-average yield and benefit from that growing payout for years to come.
There’s no question that CT REIT is one of the best dividend stocks that long-term investors can buy now. Its steady income, high occupancy rate, and strong tenant base make it ideal for cautious investors. Furthermore, with a strong pipeline of growth projects and a long track record of consistent distribution increases, it’s not just a defensive stock, it’s also one that offers the potential for significant returns over the long haul.
When you combine that with the tax-free nature of a TFSA, CT REIT is undoubtedly one of the top Canadian dividend stocks to consider buying today.
