Today’s Perfect TFSA Stock: 6% Monthly Income

SmartCentres REIT stands out as the perfect TFSA stock for Canadians seeking reliable monthly income, and long‑term stability.

Key Points
  • SmartCentres REIT offers a strong income-generating opportunity due to its portfolio of 198 retail properties anchored by major tenants like Walmart, ensuring stability and recurring revenue.
  • The REIT is diversifying into residential, office, and self-storage properties to unlock additional income streams, leveraging its vast land holdings for long-term growth.
  • With a 6.54% yield, SmartCentres provides a substantial monthly income, especially when held within a TFSA, enabling tax-free compounding and enhancing its appeal as a TFSA investment.

The Tax-Free Savings Account (TFSA) is one of the most powerful tools for Canadian investors to build an income-producing portfolio. The only problem is finding that perfect TFSA stock to add to it.

The perfect TFSA stock comes down to finding the perfect balance between income generation and stability. By extension, that also means picking a stock that can continue to generate that income irrespective of how the market fares.

Real estate investment trusts (REITs) are great examples of this. One REIT in particular that can provide that desired recurring monthly income is SmartCentres REIT (TSX: SRU.UN), and here’s why this could be the monthly income stock your portfolio needs.

dividend stocks are a good way to earn passive income

Source: Getty Images

Why SmartCentres REIT fits any TFSA strategy

SmartCentres REIT owns a portfolio of 198 retail properties. The property mix includes predominantly necessity-based retail properties that are located across Canada.

Even better, many of those retail properties are anchored by some of the largest names in retail, such as Walmart. This serves as a traffic magnet for the properties, which, in turn, provides SmartCentres with a healthy recurring revenue stream.

Those primary tenants tend to have longer-term leases, which adds an element of stability into the mix. And that’s not all.

SmartCentres’s properties also contain several secondary tenants. These tenants feed off the traffic from the primary anchor tenant, creating a natural synergy between both primary and secondary tenants.

Those secondary tenants offer a similar necessity-based appeal, and include pharmacies, banks, restaurants, doctors’ offices and other complementary businesses.

In short, the combination of a strong anchor tenant and complementary secondary tenants provides defensive appeal and stability.

Another key point to note is the changing composition of SmartCentres portfolio. In addition to its core retail properties, SmartCentres has moved in recent years to include a growing number of property types.

That includes office, self-storage and even residential properties. The appeal here is simple. SmartCentres can unlock value from the large swaths of land that the REIT already owns. The REIT owns approximately 3,500 acres of land across Canada, and this strategy represents an intensification of SmartCentres’s portfolio.

Those new properties often encompass residential towers sitting atop retail sites. The shift to include both self-storage and office space follows a similar pattern of repurposing underutilized lands.

In short, this allows SmartCentres to generate additional income streams from a single property, which is good for the REIT and investors seeking that perfect TFSA stock.

Let’s talk about that 6% dividend

One of the main reasons why investors turn to REITs and SmartCentres in particular is for the monthly income that the REIT can provide.

As of the time of writing, SmartCentres offers a yield of 6.54%. This means that investors who can allocate just $12,000 towards SmartCentres will earn a monthly income of just over $65.

That’s not enough to retire on, but it is enough to generate a few new shares from reinvestments each month. And those new shares don’t require any additional funding.

Even better, within a TFSA, those monthly distributions are entirely tax-free. This makes SmartCentres’s position within TFSA much more powerful. By extension, it also means that investors can take advantage of long-term compounding without needing to consider the tax consequences.

In short, SmartCentres really is the perfect TFSA stock for investors seeking a monthly income stream.

SmartCentres is the perfect TFSA stock right now

SmartCentres offers the qualities that a perfect TFSA stock needs: income, stability and long-term growth potential. Between the REIT’s necessity-based retail footprint and its growing emphasis on other property types, SmartCentres is moving from being a mall landlord REIT to a community builder REIT.

Factor in the attractive monthly distribution, and you have a solid REIT investment that should, in my opinion, be a core position in any well-diversified portfolio.

Fool contributor Demetris Afxentiou has no position in any of the stocks mentioned. The Motley Fool recommends SmartCentres Real Estate Investment Trust and Walmart. The Motley Fool has a disclosure policy.

More on Dividend Stocks

Piggy bank with word TFSA for tax-free savings accounts.
Dividend Stocks

How Big Does Your TFSA Need to Be to Pay $1,000 a Month?

A TFSA yielding 6% would need roughly $200,000 to produce $1,000 in average monthly income.

Read more »

Data center servers IT workers
Dividend Stocks

Data Centres Need Power, but Higher Rates Change the Math: I’d Watch This TSX Stock

The computers may be futuristic. Getting paid for supplying their electricity is pleasantly old-fashioned.

Read more »

man looks surprised at investment growth
Dividend Stocks

Withdrawing From Your TFSA? This Timing Mistake Could Cost 1% a Month

A TFSA withdrawal is tax-free, but replacing it too soon can accidentally create an expensive overcontribution.

Read more »

man in suit looks at a computer with an anxious expression
Dividend Stocks

I’m Putting My Next $2,000 Into This 4.5% Dividend Stock

Brookfield Asset Management (TSX:BAM) has a 4.5% dividend yield.

Read more »

dreaming of financial success
Dividend Stocks

How Dividends, CPP and OAS Can Fit Together in Retirement

CPP and OAS rarely pay for a full retirement. Here's how quality TSX dividend stocks such as BAM can fill…

Read more »

Canadian investor contemplating U.S. stocks with multiple doors to choose from.
Dividend Stocks

Enbridge vs. Telus: The Dividend Stock I’d Put $10,000 Into Today

Both Enbridge and Telus stocks have been favourites among income investors for their dividend yield and growth.

Read more »

money goes up and down in balance
Dividend Stocks

Foreign Money Is Pouring Into Canadian Banks: Is This One Still Worth Buying?

I’d still consider BNS for a long-term portfolio, although I’d build the position gradually rather than chase a rally that…

Read more »

Blocks conceptualizing Canada's Tax Free Savings Account
Dividend Stocks

Make $250 a Month Tax-Free: The 4-Stock TFSA Plan I’d Follow

If you are looking to generate $250/month of tax-free passive income, this TFSA portfolio will provide a long-term, growing income…

Read more »