A monthly Tax-Free Savings Account (TFSA) dividend stock yielding close to 13% can feel almost too good to be true. Yet for the right investor it can make a lot of sense. Many Canadians want their TFSA to do more than just grow quietly in the background. They want it to start paying them back. Monthly income lines up with real life. Bills arrive every month, not every quarter. When that income is tax free, the compounding effect becomes even more powerful. So let’s look at one dividend stock that deserves attention.
AP
Allied Properties REIT (TSX:AP.UN) sits firmly in the “out of favour but still functioning” category. The dividend stock owns and operates urban office properties in major Canadian cities, with a focus on well-located, high-quality space that caters to knowledge-based tenants. Think technology, media, and professional services. Office REITs have been punished over the last few years as work-from-home fears and higher interest rates scared investors away. AP has not been spared, and that pullback is a big reason the yield now looks so large.
Unit prices have fallen meaningfully from their highs, now down 25% in the last year, dragging sentiment down with them. At the same time, leasing activity has not collapsed. Occupancy has slipped from peak levels, but it has stabilized, and management has focused on tenant retention and lease renewals rather than aggressive expansion. This is not a growth REIT right now. It is a survival-and-stabilize story, which often comes before recovery.
Into earnings
Recent earnings reflect that transition phase. Revenue has been pressured by softer office demand and asset sales, but cash flow has remained relatively steady. Funds from operations declined from earlier years, yet they continue to cover distributions, albeit with less room to spare than in the past. Management has been upfront about protecting the balance sheet, selling non-core assets, and using proceeds to reduce debt.
Valuation is where AP starts to look interesting for patient TFSA investors. The units trade at a deep discount to net asset value, reflecting market scepticism toward office real estate as a whole. When sentiment is this negative, expectations are low. The trust does not need perfect conditions to improve investor returns. It only needs conditions to be less bad than feared. Even modest improvements in occupancy, leasing spreads, or interest rate relief can have an outsized impact on unit prices from these levels.
Considerations
The monthly distribution is the main draw, and not just about the headline yield. AP pays every month, which makes it easier to plan income or steadily reinvest. Inside a TFSA, that income lands without tax friction, allowing investors to either supplement cash flow or compound more aggressively. While the payout is high, it is supported by real assets in core markets, not speculative projects. Right now, here’s what the dividend stock offers in dividends from a $7,000 investment.
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | ANNUAL TOTAL PAYOUT | FREQUENCY | TOTAL INVESTMENT |
|---|---|---|---|---|---|---|
| AP.UN | $13.18 | 531 | $1.71 | $908.01 | Monthly | $6,998.58 |
So, AP can work as a TFSA holding because it fits a specific role. It is not meant to be the safest asset in your account, and it is not meant to deliver fast growth. It is meant to convert depressed valuations into steady income while you wait. Office real estate will not disappear. Companies still need space, and premium locations tend to recover first when demand returns. If rates eventually ease and office utilization finds a new normal, the trust has room to breathe again.
Foolish takeaway
The risk, of course, is that recovery takes longer than expected. That is why AP works best as part of a diversified TFSA, not the whole plan. When sized appropriately, the income can outweigh the volatility.
For investors who understand the trade-off, the dividend stock offers something rare: a very high monthly yield, paid tax free, backed by tangible assets. All at a time when expectations are already low. For those building monthly TFSA income and willing to be patient, it can quietly do the job while everyone else looks away.
