One of the best ways for investors to build long-term tax-free income is by using a TFSA. These special accounts can be used to help generate reliable monthly paycheques that are completely tax-free.
For TFSA investors, the ability to generate tax-free income each month is a major advantage.
The only challenge for investors is finding that perfect stock that helps to generate those reliable monthly paycheques.
Fortunately, this is where the market provides plenty of great options to consider, including this stellar investment that offers a 7% yield that pays monthly.
That stock is Slate Grocery REIT (TSX: SGR.UN).
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What makes Slate Grocery REIT an appealing option
Slate Grocery is a REIT. More specifically, Slate Grocery is a grocery-anchored REIT with a portfolio of over 100 properties that are located across the U.S.
This gives the REIT a unique exposure to a pool of defensive tenants that will perform well irrespective of how the overall market fares. For TFSA investors seeking those reliable monthly paycheques, the appeal is huge.
Part of the reason for that appeal is the grocery stores themselves. Grocery stores are traffic magnets. When a property has adjoining small businesses next to it, as Slate’s properties typically do, those secondary properties benefit from that same traffic boost.
Those secondary businesses can be anything from restaurants and pharmacies to banks and doctors’ offices. The appeal of a grocery store also provides a stickiness to the community that it serves, leading to higher occupancy over time.
That higher occupancy and steady demand give Slate room to grow rents without needing to expand its property base. Essential-service tenants help ensure consistent occupancy and stable rent collection.
For investors, that translates into a stable, growing source of revenue that can sustain those reliable monthly paycheques.
The other factor to consider is the defensive appeal of grocery-anchored real estate. People buy groceries across every economic cycle. In fact, grocers are essential retailers that remain open even when other retail segments face challenges.
That focus on necessity-based retail is a key reason why Slate is able to offer a 7% yield and those reliable monthly paycheques.
Let’s talk about growth potential
Slate isn’t just a defensive-focused REIT that has a high yield. The company also offers a growth angle for investors. In REITs, growth typically comes from acquisitions, redevelopment, or higher rents. Slate’s growth opportunity caters to that last option.
In the case of Slate, the REIT has in-place rents that are below market averages. This gives the REIT room to nudge rents higher as leases come up for renewal. It’s not a huge fast compounder, but it’s stable, reliable, and gradually growing.
Just as important, this means that Slate’s distribution, and by extension, the reliable monthly paycheques it provides, will continue to be covered.
Generate reliable monthly paycheques
One of the main reasons why investors turn to Slate is for that attractive monthly distribution. As of the time of writing, the REIT offers an attractive 7.3% yield.
This means that investors who can allocate $8,000 towards Slate within their TFSA will generate reliable monthly paycheques of just under $50 per month.
That’s not enough to retire on, but it is enough to buy several new shares each month from reinvestments alone. Over time, that can grow into a powerful income engine that, thanks to the TFSA, remains tax-free.
For those investors seeking a stable REIT that can provide both defensive appeal and a high-yield monthly income stream, Slate is a great option for any TFSA portfolio.
Buy it, hold it, and watch your income grow.
