When it comes to building long-term wealth, diversification is always essential. You don’t want all your capital or passive income tied to one company, one sector, one country, or even one trend.
At the same time, though, every now and then you come across a stock that’s so high quality, reliable, and shareholder-friendly that it’s worth considering as a major holding, especially with high-yield dividend stocks.
High-quality dividend stocks are some of the best businesses to own for the long haul because they don’t just pay cash; they continue to grow those payouts year after year.
That consistency is attractive for two reasons. Firstly, it leads to consistent growth of your capital and your investment. However, it also indicates the impressive quality of the company.
A business that can not only consistently earn a profit but also constantly grow that profitability and the passive income it provides to investors year after year is usually only possible when it has strong fundamentals, durable cash flow, and the ability to keep reinvesting in its operations.
So, while diversification is essential, there are some companies that are so dependable they can justify a much larger allocation. And right now, one of the passive income generators on the TSX is CT REIT (TSX: CRT.UN), a dividend stock that pays investors monthly.
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Why CT REIT is one of the best stocks passive income investors can buy?
Although there are a handful of high-quality Canadian stocks and even REITs in particular for passive income investors to consider, CT REIT might be the most underrated.
It owns a massive portfolio of retail properties across Canada, with the majority leased to Canadian Tire, which also happens to be its majority owner. In fact, nearly 90% of its rental revenue comes directly from Canadian Tire, one of the most established and well-capitalized retailers in the country.
That makes CT REIT’s cash flow incredibly stable since it receives predictable rent payments, has limited vacancy risk, and constantly keeps steady occupancy rates.
Furthermore, in addition to the reliable income it consistently generates, CT REIT continues to grow its portfolio by developing new properties and expanding existing ones. And because Canadian Tire itself is still expanding and investing in its retail network, CT REIT has a tonne of long-term potential.
Therefore, given the combination it offers of reliable passive income and consistent long-term growth potential, there’s no doubt that CT REIT is one of the best investments you can buy for your TFSA today.
Is CT REIT undervalued right now?
Although CT REIT is trading near the top of its 52-week range, it actually appears to be slightly undervalued when you dig a little deeper.
For example, CT REIT is currently trading at a forward price-to-funds-from-operations (P/FFO) ratio of 11.7 times, which is actually below its 5-year and 10-year averages of 12 and 12.2 times, respectively.
Additionally, its current forward yield of 5.9% is also above both its 5-year and 10-year average forward yields of 5.7% and 5.4%, respectively.
Therefore, not only is CT REIT attractive due to its reliable business model –or the fact that it’s undervalued – it’s also one of the best stocks passive income investors can buy for its growth potential.
Analysts estimate that CT REIT’s revenue will grow nearly 5% each of the next two years. Furthermore, it’s expected to continue increasing its dividend payments annually.
So, while CT REIT trades at such a compelling valuation, it’s easily one of the best Canadian stocks to buy now.
