Most Canadians use a Tax-Free Savings Account (TFSA) to park their funds for use in the immediate future. The main reason is that they don’t understand how to efficiently use this account. Hence, you see average TFSA withdrawals and contributions move hand in hand. That is like exchanging Bitcoin for a slice of pizza. You get the point!
TFSA has immense potential to unlock tax-free income. Imagine getting constant paycheques for which you don’t have to pay tax to the Canada Revenue Agency (CRA). Just as you built your way up the career ladder, you have to build your portfolio for a tax-free passive-income pool. And perfect TFSA stocks for this are high-yield TSX stocks, which are also stable dividend payers.
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The appeal of SmartCentres REIT for your TFSA
The TFSA allows you to invest in TSX stocks and grow and withdraw money tax-free. It means you need not worry about dividend tax, capital gain tax, or reducing your income-linked government pension, like the Old Age Security (OAS) pension. A perfect stable dividend payer is SmartCentres REIT (TSX: SRU.UN).
With a 6.8% yield, SmartCentres REIT stands out in the current market environment. High yield is often associated with high risk, but SmartCentres has a wild card up its sleeve, which gives it an edge over other REITs. Walmart is its key tenant occupying 23% of its leasable area. The world’s biggest grocer is a recession-proof tenant. It’s not just a risk mitigator but also an anchor that attracts other retailers to open stores nearby.
SmartCentres REIT’s partnership with Walmart dates back to 1999. This very factor has helped the REIT earn regular recurring income and pay stable monthly dividends for 21 years without any dividend cuts. It is among the few REITs that sustained the pandemic and housing crisis without a dividend cut.
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Why is SmartCentres REIT one of the best high-yield TSX stocks to buy now?
SmartCentres diversified into mixed-use properties with a $15 billion transformation plan in 2020, which centred on converting shopping centers into City centers. SmartCentres is intensifying the value of land where its retail stores are built and looking for more ways to earn revenue from underutilized spaces.
It is looking to earn recurring rental income from shopping centres, offices, apartments, parking spaces, and self-storage. Moreover, it is selling condos and townhouses to recover and repay the debt used for developing these spaces. It is also offering value-added services such as electric vehicle charging, digital signage, and logistics space to earn more from the same land parcel.
The REIT has 14% of its total assets under development. This presents both risk and opportunity. For instance, the pandemic and interest rate hikes forced the REIT to slow the development. However, these are short-term risks that the REIT managed with financial discipline, although that inflated its dividend-payout ratio to almost 100%.
But the REIT made a strong comeback in the second half of 2025 as the Canadian government boosted housing development projects. The next five years could see growth as more development projects come online and unlock rental income for SmartCentres REIT.
Investing in SmartCentres REIT: A strategy for growth
SmartCentres REIT is a stock to buy and hold for the long term. You could invest in it throughout the year, accumulating income-generating units. At $1.85 annual dividend per share, you will need 1,000 units to earn $1,800 in annual dividend income. Instead of investing only your TFSA contributions, you can divert the dividend payout to buy more units. The compounding effect can convert this into a sizeable income in 10 years.
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