When it comes to building passive income and buying dividend stocks for the long haul, consistency matters a lot more than many investors realize.
Most dividend stocks only pay investors quarterly, which is perfectly fine if your goal is long-term compounding. However, if you’re trying to build a portfolio that actually generates steady cash flow, getting paid monthly can be much more appealing.
And while there are plenty of TSX stocks that return cash to investors each month, especially in the real estate space, one of the top stocks to consider for reliable and consistent monthly income is Morguard North American Residential REIT (TSX: MRG.UN).
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Why Morguard REIT generates such reliable income
As its name suggests, Morguard is a residential REIT, one of the most defensive sectors of the economy you can invest in. However, where Morguard differs from its peers is that it also benefits from diversification across both Canada and U.S. Sunbelt markets, which continue to see strong population growth and migration trends.
For example, the dividend stock owns a portfolio of more than 13,000 apartment units across North America, with roughly two-thirds of its net operating income coming from its U.S. business.
That exposure is significant because it diversifies Morguard’s portfolio across multiple regions and markets, while also giving it access to stronger growth trends in the U.S.
Morguard’s U.S. rents have risen faster than its Canadian average monthly rents over the last decade, and cap rates on its U.S. portfolio continue to be higher, which supports both income and long-term growth potential.
So, given the essential nature of residential real estate and Morguard’s diversification, with properties in nine different states and two provinces, it’s a dividend stock that continues to generate reliable monthly income.
Why it’s a top dividend stock to buy now
Beyond the reliability of the business itself, the fact that Morguard currently yields roughly 4.6% and is trading near its 52-week low makes it one of the top dividend stocks to consider today.
Furthermore, Morguard had already been trading at a reasonable valuation in recent years even before the recent weakness.
Like many REITs, Morguard has faced pressure over the last few years due to higher interest rates, which have weighed on valuations across the real estate sector.
As a result, the stock is still trading near its recent lows in roughly the $16 to $17 range.
Demand remains strong
However, the important thing to understand is that this pressure has been driven much more by macro conditions and softer near-term fundamentals rather than weakness in the underlying business itself.
The portfolio is still performing well, occupancy remains high, and demand for housing hasn’t disappeared. What’s changed is simply the valuation investors are willing to pay for REITs in a higher-rate environment.
That’s why it’s a dividend stock I’d certainly consider today, especially for monthly income. As the share price has remained under pressure, the yield has increased to roughly 4.6%, which is higher than its 5- and 10-year average of 4.3%.
It’s also worth noting that Morguard pays out just 50% of its adjusted funds from operations, which keeps the dividend very sustainable. Furthermore, it has increased that distribution every year over the last four years, for a total increase of roughly 13%.
That’s crucial because it shows that Morguard’s business continues to perform well, even if the stock has underperformed.
Furthermore, Morguard generates the exact kind of steady monthly income stream you can actually build around over the long haul.
So, with the stock still trading near its lows and offering a compelling yield of 4.6%, it’s easily one of the top Canadian dividend stocks to buy right now.
