Your Tax-Free Savings Account (TFSA) is a great tool for high-yield dividend stocks and high-growth stocks. Suppose you are looking for a monthly payout to supplement your salary or pension, monthly dividend stocks can be a good investment. The stock selection depends on how much you want and when you want. The Toronto Stock Exchange (TSX) has dividend stocks with 6% annual yield, but the payout is quarterly.
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A 6.8% yield stock that pays cash every month
Several power stocks gave a monthly payout, but they gradually shifted to quarterly payments. An assured monthly payout with high yield is possible mostly with real estate investment trusts (REITs). Among the REITs, one that has a long history of paying dividends without any cuts is SmartCentres REIT (TSX: SRU.UN). It has been paying cash consistently every month for the past 21 years.
It is the largest retail REIT in Canada with 197 properties and $12 billion in total assets. When divided by the total number of units after deducting debt, the net asset value comes to $35.65. This REIT owns several stores that Walmart leases.
Can SmartCentres REIT continue paying cash every month for years?
SmartCentres thrived through the 2008 Financial crisis and the 2020 pandemic because of its quality tenant base and strong management. For instance, it reduced its development activities in the last two years as interest rates surged to 5%. Even now, it is limiting new financing activities to refinance debt maturities and construction projects coming in the next year.
This cautious approach comes as real estate prices saw a significant correction after a decade-long increase. Almost all REITs reported a decrease in the fair market value (FMV) of the property. This is important as SmartCentres also develops and sells residential properties.
During the phase of high interest rates, its distribution payout ratio touched 100% of adjusted funds from operations. However, interest rate cuts by the Bank of Canada helped SmartCentres reduce its weighted average interest rate to 3.94% in the second quarter of 2025 from 4.25% a year ago.
Moreover, a rent increase helped it increase operating income from the same property by 4.8%. Higher rent and sale of residential properties helped the REIT normalize its payout ratio to 84.3% of adjusted funds from operations (AFFO). This ratio hints that the risk has subsided and the REIT can continue paying $0.15417 per unit every month.
Three ways to invest in this 6.8% yield stock in TFSA
SmartCentres REIT unit price has already recovered 13.5% from its April low and is currently oversold with a Relative Strength Index (RSI) of 72. RSI measures the 14-day price momentum to determine if the stock is overbought (above 70) or oversold (below 30).
Dollar-cost averaging: One reason for the sharp rally is its strong second-quarter earnings released on August 7. A small correction is likely as the market absorbs the earnings figures. You could consider buying the unit at $25 or $26. Instead of investing $10,000, consider investing $2,000 per month to benefit from dollar-cost averaging as the unit price fluctuates amid economic uncertainty.
DRIP: SmartCentres REIT offers a dividend-reinvestment plan (DRIP), in which it gives you income-generating units instead of cash. If you want to build a passive source of income and don’t need the money immediately, you could opt for DRIP and accumulate more units. The power of compounding could significantly grow your money if you stay in a DRIP for over 10 years.
Convert quarterly dividend to monthly income: To implement the above two methods of investing, you may not directly invest the TFSA contribution in SmartCentres. You could consider investing a significant amount in dividend growth stocks, like goeasy, and use their quarterly dividend to buy the REIT’s units under a DRIP. This will give you the dual benefits of diversification and compounding.
