Can you get assured money on a fixed date from investments, just like you get from a salary? If you invest in trusts, it is possible. Trusts have to distribute a majority of their income to unitholders, or they will be taxed at a higher rate. A trust pays you from the income it generates from the assets it holds. Thus, real estate investment trusts (REITs) are a popular investment instrument for those looking for timely monthly payouts.
This 7.7% dividend stock pays between the 28th and 31st of every month
Before investing in REITs, one should look at the quality of the assets in the trust and its ability to generate income. Slate Grocery REIT (TSX:SGR.UN) has 116 properties across 23 states of the United States. These properties are valued at US$2.4 billion. A majority of these stores are occupied by grocers and have high rent renewal.
The REIT charges an average in-place rent of $12.82 per square foot, which is below the market average of $24.092. This gives it room to increase rent on renewals and new leases without affecting occupancy. In the third quarter, its renewal spreads were 15.1% and new leases were 34.8% above the comparable average in-place rent, while occupancy remained stable at 94.3%.
These renewals have increased funds from operations and reduced the dividend payout ratio to 78.7%. Its debt is 53% of its gross book value, which is high. And its weighted average interest rate has increased to 5% from 4.4% in the third quarter of the previous year.
While the asset quality and ability to generate income are strong, higher debt levels increase the risk. It is for this risk that the dividend yield is 7.7%.
Despite this, Slate Grocery has regularly paid US$0.072 dividend per share between the 28th and 31st of every month. Although the REIT did not grow its dividends, Canadian investors stand to benefit from foreign exchange fluctuations.
How much can you earn from this 7.7% yield?
A $5,000 investment in Slate Grocery can buy 326 units of the REIT. The REIT pays $0.072 per month. Over 12 months, it adds up to $0.864 per share, which is 7.7% of the unit price of $15.31. A $5,000 investment today can start providing you a monthly payout of US$23.47, which adds up to US$281.7 in a year.
Depending on the dollar price fluctuations, Canadian investors will get a slightly higher amount.
You can use the payout to meet your expenses. If you don’t need that amount, you can invest it in other high-yield stocks to compound your returns or in growth stocks.
There are some good dividend and growth stocks under $23 worth considering. RioCan REIT is trading at $18.80, and HIVE Digital Services is trading below $4. Your monthly dividend can be used to accumulate these two stocks. Buying even one stock per month could grow to 24 shares in two years and 60 shares in five years.
Investing money to build more sources of income is what makes compounding appealing. Here you don’t rely on just one business but diversify into multiple streams that ensure you a payout in every situation.
Investor tip
Instead of relying on one stock for a monthly payout, allocate a core dividend stock and some secondary dividend stocks. They will work as your salary and side hustle. Your initial investment will come from your core dividend.
