One of the best sources to earn a monthly income is through rent. Many homeowners rent out their basements to earn passive income. However, being a landlord is a full-time job, and it comes with expenses, such as property taxes, repairs, and brokerage fees. You can get the benefit of rental income with real-estate investment trusts (REITs). Retail stores are some of the best properties to earn rent. They are at prime locations and need marketing and advertising. Thus, they command a higher yield. Among the many retail REIT’s, RioCan REIT (TSX: REI.UN) is worth considering for your Tax-Free Savings Account (TFSA).
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Why RioCan REIT is worth considering for monthly income?
RioCan REIT has strategically placed a majority of its stock in the Greater Toronto area, which fetches higher rent. The store location is where there is a high population and a higher average household income. This helps it attract discretionary and essential retailers alike. It has retailers like Loblaws and Costco as tenants, with no single tenant accounting for more than 5% of its rent.
This diversified tenant base helps it charge rent at market rates. Otherwise, larger tenants bring with them volumes but also demand below market rates for their sheer size. RioCan has been growing its rental income with a blended lease spread of 21% in 2025. Despite increasing the rent, it managed to retain 93.1% of its tenants. Higher retention and leasing spread help it grow its average rent per square foot by 3.5% to $23.18. The REIT noted that the limited new supply of retail stores supports a rent increase and will continue to increase rent.
All the factors make RioCan a stock worth investing in.
Why is RioCan REIT ideal for TFSA monthly income?
RioCan gives a 5.3% annual dividend yield, and this dividend is spread across 12 monthly installments. In Canada, dividends are taxable in the hands of shareholders. However, investing through a TFSA helps you skip the dividend tax because of the account’s special tax treatment. Any investment can grow tax-free in a TFSA, and TFSA withdrawals are not reported as taxable income.
If you are a retiree, RioCan’s monthly dividend income will not affect your income-based benefits like the Old Age Security pension. If you are a high-income earner, the TFSA dividends won’t add to your tax burden. If you are young and have received a significant amount, you can start to invest early in a TFSA at age 19 and keep reinvesting the dividend for the next few years in high-growth stocks tax-free.
Risks involved in RioCan
No stock or investment is without risks. While RioCan is safeguarded from concentration risk because of its highly diversified tenant base, the occupancy ratio is slightly volatile and difficult to predict. Knowing the good and bad sides of the stock can help you make informed decisions.
The REIT has been reducing its debt to keep it in its target range of 8.0x – 9.0x its adjusted Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA). The payout ratio is also almost near its target of 70%.
Analyzing the risks and rewards, RioCan is a stock to own in your TFSA during economic growth.
