A Perfect TFSA Stock: 8.2% Payout Each Month

This grocery-anchored REIT combines dependable monthly payouts with long-term growth potential for TFSA investors.

Key Points
  • Slate Grocery REIT (TSX:SGR.U) offers a high 8.2% annual yield with monthly distributions, making it an appealing choice for TFSA investors seeking stable, passive income.
  • The REIT's strong rental performance and significant rent growth potential highlight its reliable performance even in a mixed real estate market.
  • With a focus on grocery-anchored properties in fast-growing U.S. regions, Slate Grocery REIT looks well-positioned for long-term income and value growth.

When you’re using the power of your Tax-Free Savings Account (TFSA) to generate income, consistency is everything. A stock that keeps doing its job while you do yours. And if that stock also offers a high yield with monthly distributions, it becomes even more appealing for TFSA investors focused on passive income. That combination isn’t easy to find, but one TSX-listed real estate investment trust (REIT) is delivering just that.

In this article, I’ll talk about Slate Grocery REIT (TSX: SGR.U), a dependable monthly dividend stock for TFSA investors that not only gives you exposure to everyday real estate but also currently offers one of the most attractive yields on the market.

TFSA (Tax-Free Savings Account) on wooden blocks and Canadian one hundred dollar bills.

Source: Getty Images

A high-yield monthly dividend stock for your TFSA

If you don’t know it already, Slate Grocery REIT is a Toronto-based company that owns and operates a portfolio of grocery-anchored retail properties across major U.S. metro areas. These are the spots people go to every week without a second thought — like grocery stores, pharmacy stops, and everyday shopping spots.

After rising nearly 8% over the last year, this REIT currently trades at $14.74 per unit with a market cap of about $873 million. What makes it especially attractive to income-focused investors is its outstanding annualized dividend yield of 8.2%, with distributions paid out each month.

A look at its recent financial performance

While Slate Grocery REIT is yet to announce its third-quarter results (due on November 6), its business continued to perform reliably in the second quarter, even in a market that has seen mixed results across the real estate sector.

The company’s rental revenue climbed 1.1% YoY (year over year) during the quarter to US$52.4 million, while its same-property net operating income (NOI) also increased by 1.1%. Over a 12-month period, its same-property NOI saw a better growth of 3.2%.

Last quarter, the REIT completed over 423,000 square feet of leasing activity. Slate’s renewal leases were signed at 13.8% higher rates than the previous ones, and new leases were signed at 28.8% above comparable in-place rents. This strong rental spread showed continued demand for its grocery-anchored properties.

Positioned well for long-term income and value growth

Interestingly, the average in-place rent across Slate’s portfolio is just US$12.77 per square foot — nearly half the national market average of US$24. That gap gives it a lot of room to gradually increase rents as leases come up for renewal, without pushing tenants away.

On top of that, the REIT operates in 23 U.S. states and is heavily concentrated in fast-growing regions like Florida, North Carolina, and Georgia. These areas are seeing continued population growth, which could help drive demand for local retail spaces anchored by essential services like grocery stores.

With 94% occupancy, limited new retail construction in its markets, and strong tenant retention, Slate Grocery REIT looks well-positioned to maintain stable cash flows in the long run, making it an even more attractive choice for TFSA investors.

Fool contributor Jitendra Parashar has no position in any of the stocks mentioned. The Motley Fool recommends Slate Grocery REIT. The Motley Fool has a disclosure policy.

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