I’d Buy This 3.3% Dividend Stock in Bulk Before the Next CRA Audit Wave

With a potential wave of Canada Revenue Agency (CRA) audits, some investors might be feeling nervous about what’s sitting in their portfolios. While the Tax-Free Savings Account (TFSA) protects you from taxes on capital gains and dividends, it doesn’t protect you from scrutiny, especially if you’re seen as trading rather than investing. That’s why now might be a smart time to double down on steady, income-producing assets that are clearly designed for long-term, hands-off investing. One dividend stock that fits the bill is Chartwell Retirement Residences (TSX:CSH.UN).

About Chartwell

Chartwell is a Canadian real estate investment trust (REIT) focused on senior housing. It operates across four provinces, managing a blend of independent living, assisted living, and long-term care residences. The dividend stock’s focus on essential housing and health services means it’s relatively insulated from economic swings, and its core demographic of Canada’s ageing population is growing steadily. When you’re looking for consistency and predictability, those are good things.

The most recent earnings report shows that Chartwell is holding its own in a challenging environment. For the first quarter of 2025, revenue came in at $252.9 million, up from $196.6 million a year earlier. Same-property net operating income surged 21.3% to $70.5 million , and funds from operations rose 43.1% year over year to $56.2 million. That’s the kind of steady growth that helps underpin its generous dividend.

That dividend

Right now, Chartwell pays a monthly distribution of $0.051 per unit, which adds up to about $0.61 annually. With the stock is trading around $18.50, that works out to a dividend yield of roughly 3.3%. That kind of income is hard to ignore, especially when it’s tax-free inside a TFSA.

But let’s not pretend this is a risk-free choice. One of the biggest red flags with Chartwell is its payout ratio. Based on Q1 net income of $33.2 million, the distribution represented about 155% of that amount. However, REITs are required to pay out a large portion of earnings, and many investors focus on cash flow instead. On that front, Chartwell’s FFO more than covers the dividend, for now.

Considerations

Debt is another issue to watch. Chartwell carries a significant amount of it, which isn’t unusual for real estate investment trusts, but still worth flagging. Its debt-to-equity ratio remains elevated. In a rising interest rate environment, that can pressure margins and limit flexibility. However, the Bank of Canada has paused hikes recently, and there’s growing speculation about cuts in the year ahead. If rates ease, Chartwell’s cost of borrowing could come down, giving it room to reinvest or grow its dividend.

One more thing to keep in mind is occupancy. Chartwell’s occupancy rate hit 91.5% in Q1 2025, up 530 basis points from Q1 2024, showing the pandemic-related weakness is normalizing. As more seniors return to community living and healthcare concerns stabilize, that trend should continue.

Bottom line

If the CRA is going to be more aggressive with audits, the best strategy is to ensure your TFSA is clearly aligned with long-term investment goals. A high-yield REIT that delivers stable monthly income and serves an essential demographic makes a strong case. Chartwell isn’t flashy, and it’s not a growth rocket, but in this environment, that might be exactly what your TFSA needs. Especially with just a $10,000 investment paying out $636 each year!

In short, I’d load up on Chartwell before the audit spotlight starts to shine brighter. It’s steady, tax-efficient, and plays a critical role in the Canadian housing landscape. For a TFSA investor looking for income with clarity, it checks all the right boxes.