A Perfect TFSA Holding That Pays Out Each Month

If you had a choice to invest $10,000 and get $716 annually for 15 years or get $600 today and grow it by 3% annually for 15 years, which one would you choose? In the first case, your cumulative dividend would be $10,740, and $11,170 in the second. (We have rounded off the numbers to the nearest multiple of 10.) Also, your annual payout will be $908 after 15 years in the second case, and remain $716 in the first case.

A perfect TFSA holding for you

There is no one-size-fits-all stock. The best stock depends on your financial situation and requirements. If you are in immediate need of money and your expenses depend on your passive income, the first option is the best. However, if you are building a passive income pool and have a long-term investment horizon, the second option is perfect for you.

Both these options are worth holding on to in the Tax-Free Savings Account (TFSA), as they allow you to grow your investment tax-free and make tax-free withdrawals. Another benefit of TFSA payouts is that they do not affect your Old Age Security (OAS) pension, which depends on your previous year’s taxable income. If your 2025 taxable income is above $93,454, the CRA will claw back OAS in 2026.

The first case of a high-yield dividend stock

A $10,000 investment in a TFSA today can buy 387 units of SmartCentres REIT (TSX: SRU.UN), with an annual yield of 7.2%. This REIT doesn’t grow dividends, but it hasn’t cut them either. It retained its dividend even during the 2008 Global Financial Crisis and the 2020 pandemic.

Several retail and residential REITs, like RioCan and Allied Properties, slashed their dividends, but SmartCentres avoided dividend cuts thanks to 25% rental income from Walmart. Another major portion of its rent comes from grocery-anchored stores. It has been intensifying the areas near its stores by building mixed-use properties – residential, commercial, and warehouses – and selling them for capital gain.

It maintains tight control over debt and the number of development projects, as delays in development and sales can block capital. Such a scenario occurred in 2022 as interest rate hikes crashed house prices and pushed SmartCentres’ payout ratio close to 100%.

It has grown dividends in 9 of the last 20 years. This cautious dividend growth has helped it sustain its dividend. You can buy this stock to get a high, stable, and assured monthly payout.

The second case of an inflation-adjusted dividend stock

A $10,000 investment in a TFSA today can buy 615 units of CT REIT (TSX: CRT.UN), which has an annual yield of 5.8%. It has been growing its dividend at an average annual rate of 3%. It managed to do so because 90% of its rental income comes from its parent, Canadian Tire. The REIT has an advantage of first refusal whenever Canadian Tire wants to buy, expand, or develop a store. It does not spend on promotion and brokerage to increase occupancy.

Also, the REIT doesn’t have significant construction loans or mortgages. A majority of its debt is unsecured debentures with no rigid repayment timelines. Assured rent, low finance costs, and rising rental income have helped it grow cash flow and reduce the dividend payout to 73% even after growing it by 3%. The company uses the remaining cash flow to build and acquire stores and increase rent.

The two perfect TFSA holdings that pay out each month

If you invest $10,000 in each of the above stocks, CT REIT’s dividend income will surpass SmartCentres’ in the eighth year.