The Tax-Free Savings Account (TFSA) is one of the best places for Canadian investors to generate steady passive income. The account is even more attractive when the TFSA stock you choose pays out monthly.
For those investors trying to build a regular stream of cash flow, a monthly-paying TFSA stock can make the account feel more like a recurring income source.
This approach helps TFSA investors build predictable, tax‑free income that compounds over time.
The important part here is choosing the right TFSA stock to invest in. Seeking out a high yield blindly rarely works. Fortunately, there are great investments on the market that can provide a high yield and a monthly payout.
One of those options to consider is Allied Properties Real Estate (TSX: AP.UN). Here’s why it could be the right investment to create a monthly income stream in your TFSA.
Source: Getty Images
Why Allied Properties looks interesting now
Allied Properties is one of Canada’s larger REITs. The REIT mainly owns office properties located in major metro markets across Canada. In recent years, Allied Properties has shifted its portfolio to include more mixed-use properties.
Part of the reason for that shift is the same reason why Allied Properties’ yield is so high. Office REITs have struggled in recent years as higher interest rates and remote work have weighed heavily on the sector.
That can be troubling for a capital‑intensive business that relies on debt to fund upgrades and a steady stream of tenants using its properties to maintain operations.
Allied Properties isn’t alone in that struggle. Those same concerns have pushed down valuations across many REITs, especially those tied to workspace demand.
That REIT’s stock price reflects that dip, falling nearly 40% over the trailing 12-month period.
That being said, along with the risk, there’s also an opportunity.
Allied Properties still owns a valuable portfolio of real estate that’s concentrated in urban markets. As interest rates steady and begin to drop, and leasing conditions stabilize, that could benefit Allied Properties over the longer term.
Until then, investors can collect the monthly distribution while waiting for a recovery.
A TFSA stock built for monthly income
One of the main reasons that Allied Properties appeals to investors as a TFSA stock is its monthly distribution. Investors can take the payment as income or, in the case of investors not ready to draw on that income, reinvest it into more units.
Monthly payments are especially valuable for investors who prefer consistent cash flow rather than quarterly payouts.
Perhaps best of all, investors should note that within a TFSA, income continues to grow without creating a tax bill.
Over time, those monthly reinvestments can really boost compounding.
Instead of waiting every three months, investors receive more frequent cash flow. For those trying to build passive income, that monthly rhythm can be appealing.
As of the time of writing, Allied Properties offers a 7.1% yield. This means that a $7,500 position in the REIT will generate over $520 in annual income. Investors who choose to reinvest that income would generate over 50 units each year from reinvestments alone.
That factor alone makes this TFSA stock worthy of consideration.
Is this TFSA stock a buy for your portfolio?
Allied Properties is not the safest TFSA stock on the TSX. What it does offer investors is exposure to a sector that is trading at discount levels after years of pressure.
That combination provides appeal for investors who want more income from their TFSA and are willing to be patient. For investors building a TFSA passive income strategy, that monthly distribution is the main appeal.
This makes the REIT a potential addition as part of a larger, well-diversified portfolio.
