A lot of the time when we discuss investing, we’re looking at the future. And in general, honestly, that’s what your goal should be. However, sometimes, we need cash now. Or if not right now, perhaps in the near future. And that’s what the Tax-Free Savings Account (TFSA) is for.
Sure, we all want to save for retirement. But we also want to save for a house, pay off debt, or take that long-awaited vacation. TFSAs can help, especially when creating a dividend ladder within them. Today, let’s look at how to create that dividend ladder to help make you some monthly cash flow, and some dividend stocks to help.
Climbing that ladder
First, let’s look at how to create that dividend ladder in the first place. This involves a strategy of selecting dividend stocks that generate regular, monthly cash flow. So, what’s your first step? Identify those monthly payers, ensuring cash flow throughout the year. This might involve owning stocks in different sectors or companies with staggered payment schedules.
From there, evaluate the dividend stability. Investors will want to focus on companies that offer reliable and attractive dividend yields, all while holding a stable payout ratio. To find them, check out the payout history and gauge consistency. Remember, don’t focus on one area. Find different stocks across different industries to reduce your risk. This will help protect your portfolio against industry-specific downturns, and that means consistent dividend payments.
Then, you’ll want to monitor and adjust as needed. By regularly reviewing your portfolio, investors can identify if dividend policies are changing, financial health is dwindling, or growth has left you exposed. Adjust your holdings, and you can ensure monthly cash flow continues to come in without exceeding your TFSA limit.
Three options to consider
For investors considering dividend stocks, I would look to Exchange Income (TSX:EIF), Slate Grocery REIT (TSX:SGR.UN) and SmartCentres REIT (TSX:SRU.UN). First, there’s EIF. This dividend offers a 3.61% yield and a consistent monthly income stream. The dividend stock has been committed to rewarding shareholders through regular dividends, and that’s supported by strong financial performance. Its diversified business model across aerospace and manufacturing also supports dividend reliability.
Then there’s SGR, a real estate investment trust (REIT) focusing on grocery-anchored real estate. This gives investors stability through essential services. With an 8.09% dividend yield, it provides substantial income that remains solid through any volatility thanks to its stable grocery demand.
Finally, we have SRU, which is both stable and essential, while also growing. The dividend stock is also a REIT, with a forward dividend yield of 6.92%. It offers attractive returns from its strategic management and high occupancy rate, and has been expanding into new areas such as infrastructure for future growth. Again, it offers that monthly dividend as well.
Bottom line
So, let’s say you have $21,000 to invest and put $7,000 towards each of these dividend stocks inside a TFSA. Here’s what that might look like on the TSX today.
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY | TOTAL INVESTMENT |
|---|---|---|---|---|---|---|
| EIF | $72.83 | 96 | $2.64 | $253 | Monthly | $6,991 |
| SRU.UN | $26.70 | 262 | $1.85 | $484 | Monthly | $6,995 |
| SGR.UN | $14.74 | 475 | $1.20 | $570 | Monthly | $6,997 |
You’ve now made a dividend ladder that provides robust monthly cash flow through consistent and substantial dividends. These dividend stocks all stand out for their financial stability within essential areas and growth initiatives. By using these dividend stocks for the long term, you can meet any goal you set your mind to.
