Most of the time, especially when it comes to advice for Canadians nearing retirement, I focus on discussing the best Canadian stocks to own. However, the market is vast and not every publicly-traded company can be a good investment, based on your investment goals. An investment strategy that works for one investor might not be the best for another to achieve their goals.
Just as there are stocks that are too attractively priced to ignore, there are plenty that you should avoid allocating any money to right now. A solid retirement plan requires carefully considering where to bet your money to fund a comfortable retirement. Today, I will discuss two TSX stocks that you might be better off avoiding right now.
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Allied Properties REIT
Real Estate Investment Trusts (REITs) are aplenty on the TSX and offer investors the chance to generate monthly returns like a landlord without the cash outlay or hassle that comes with being one. These trusts own and operate a portfolio of properties, generating cash from leases or rent. In turn, these trusts distribute cash monthly to investors based on the amount of units or shares they own in the trust.
Typically, REITs are safe bets, but Allied Properties REIT (TSX: AP.UN) is one that I would not recommend owning right now. There are several other Canadian REITs that can be better investments. Allied Properties is a REIT that has been paying investors their dividends at unsustainable payout ratios for a while. With a 5-year average dividend yield of 8.3% and an almost 400% payout ratio, the REIT might enact a suspension or dividend cut at any time. It might be better to avoid investing in it if you seek reliable monthly passive income.
Timbercreek Financial
Timbercreek Financial Corp. (TSX: TF) is a $566.9 million market capitalization TSX dividend stock boasting high-yielding dividends. As of this writing, the stock trades for $6.85 per share and pays $0.0575 per share each quarter, translating to a tempting annualized 10.1% dividend yield. Canadians nearing retirement might find its dividends attractive for boosting the passive income in their portfolios, but it might be a dividend trap.
The leading non-bank commercial real estate lender provides short-duration and structured financing solutions to commercial real estate investors. However, the market has not been doing too great of late, and that shows in its performance. The release of its fourth-quarter earnings for Fiscal 2025 showed that its mortgage portfolio has increased, alongside its expected credit loss amid the current market environment.
The credit risk is quite high, especially considering the broader economic landscape. For investors seeking reliable returns, it might not be worth the 10% dividend yield to take on such risk.
Foolish takeaway
Stock market investing is inherently risky, but some investments are riskier than others. Depending on your financial goals, the ideal assets to buy and hold in your self-directed portfolio can differ. If you are a retiree or someone nearing retirement, these two stocks might be better avoided.
