Dividend investing is an excellent way to get more out of your investment capital than you might get with fixed-income assets like Guaranteed Income Certificates (GICs) or high-interest savings accounts. Investing in a portfolio that consists of some of the best monthly dividend stocks can be a great way to generate income like a landlord, but without all the hassle that comes with it.
Besides the massive cash outlay required to get into it, buying apartments as investment properties to generate rental income comes with too many challenges. Fortunately, Real Estate Investment Trusts (REITs) offer you the opportunity to become a lazy landlord.
These trusts are companies that pool together capital from investors to own, develop, and manage a portfolio of real estate assets. These companies generate monthly revenue through the portfolio and provide monthly returns to investors based on the amount of units (or shares) they hold.
Real estate companies can be excellent investments for dividend-seekers as well-established, defensive, and reliable businesses. Today, I will discuss one of my top picks for those interested in investing in the Canadian real estate market while enjoying the liquidity of the stock market: Canadian Apartment Properties REIT (TSX:CAR.UN).
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The REIT
Canadian Apartment Properties, or CAPREIT, is a $6 billion market-cap trust that acquires and leases multi-unit residential properties primarily located near major urban centers throughout Canada. Its portfolio consists mainly of apartments and townhouses close to public amenities. The company generates almost its entire revenue from rental income derived from leasing its properties to tenants.
CAPREIT is the largest REIT in Canada focusing on the residential sector, boasting thousands of units spread throughout major urban centers all over the country. As of this writing, however, the stock trades for a discount. The stock trades at $37.85 per share, down by 18.8% from its 52-week high. While such a downturn might be alarming to newer investors, seasoned investors might see it as a bargain.
The highs and lows
No matter how reliable a stock is, it cannot be immune to the impact of broader geopolitical and economic factors. CAPREIT is a reliable and high-quality business that you can confidently invest in, but it has seen its share of troubles lately. The last few years saw interest rates climb high due to measures taken by the Bank of Canada to combat inflation. However, central banks are cutting down interest rates again.
Lower margins have put financial pressure on the company, and that can be attributed to the decline in its share price. However, lower interest rates will provide the much-needed relief to its margins. Better margins can lead to higher earnings for the REIT. In turn, that can result in more dividend growth for investors to enjoy.
Foolish takeaway
As of this writing, CAPREIT offers monthly distributions of $0.1292 per share, translating to a 4.1% dividend yield. Its current dividend yield has become inflated due to the downturn in share prices. Right now might be the ideal time to invest in its shares to lock in higher-than-average-yielding dividends, considering the average for the last few years has been 3.1%. If you are building a portfolio of monthly dividend stocks, CAPREIT might warrant a space among your holdings.
