Many investors rely on their Tax-Free Savings Accounts (TFSA) to build long-term wealth while tax-sheltering the future income from their investments. A successful self-directed TFSA portfolio is a balanced one that accounts for riskier growth stocks and reliable income-focused stocks.
While growth is important, regular monthly cash flow into your TFSA can feel more productive, especially if you use the power of compounding. This is why monthly dividend-paying stocks are some of my favourite picks to buy and hold in a TFSA. That said, not every monthly dividend stock is worth adding to your TFSA portfolio.
Besides attractive dividend yields, you must check whether the underlying business can hold up in the changing market environment. If you’re on the hunt for an ideal TFSA stock for monthly income, Choice Properties Real Estate Investment Trust (TSX: CHP.UN) can be worth a closer look.
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Choice Properties REIT
Real estate investment trusts (REITs) are a type of asset that trades on the TSX like stocks. Instead of shares, investors can buy units of a trust. Based on the number of units or shares an investor owns, the trust distributes monthly payments, essentially letting investors earn like a landlord but without the cash outlay or hassle that comes with owning investment properties.
Various trusts have different approaches to investing in real estate and delivering returns to investors. Choice Properties is Canada’s largest REIT, boasting a $12.02 billion market cap. It owns, operates, and develops high-quality commercial and residential real estate nationwide. Its portfolio comprises necessity-based mixed-use, residential, retail, and industrial properties.
Monthly dividend income backed by a defensive business
Choice Properties REIT owns around 700 income-generating properties that offer approximately 68 million square feet of gross leasable area. Most of its properties are anchored by high-quality grocery operators, and its industrial properties serve important distribution markets. This means the trust boasts the kind of occupancy rates, tenant retention, rent collection, and steady cash flows to support its monthly payments.
Choice Properties REIT pays its investors $0.065 per unit each month, translating to a 4.71% annualized dividend yield that you can lock into your self-directed TFSA portfolio.
The essential nature of the businesses its tenants operate means Choice Properties can wade through harsh economic environments and fare better than many of its peers. The March-ending first quarter for the fiscal year saw the trust report an $82.7 million net loss.
While it might seem alarming, it is a significant improvement from the $96.2 million loss in the same period last year. The improvement came through favourable non-cash fair value changes that helped the trust improve its balance sheet. The trust saw its funds from operations in the quarter rise by 2.7%, and its same-asset net operating income grew by 3% in the same period.
Foolish takeaway
Choice Properties REIT offers a powerful mix of monthly income, backed by high occupancy rates and exposure to in-demand Canadian real estate. If you reinvest the monthly dividends to purchase more units, you can accelerate your tax-free wealth growth by unlocking the power of compounding in a TFSA.
