So, you’ve got $7,000 and want to turn it into a dream come true. Well, good news! A $7,000 Tax-Free Savings Account (TFSA) contribution could generate nearly $477 in annual passive income from one Canadian real estate investment trust (REIT).
The payments would arrive every month, while the TFSA could protect the income and future gains from Canadian tax. Not a bad job for money that might otherwise sit around contemplating its purpose.
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Why monthly income works
Monthly distributions do not create higher returns on their own. They can, however, make passive income easier to use. Investors can reinvest the cash, cover recurring expenses, or gradually build positions in other companies.
That makes that TFSA strategy even more useful. Investment income and capital gains can grow tax-free inside the account, while withdrawals do not count as taxable income. Investors still need to check their available contribution room before adding cash.
One income investment currently stands out, Automotive Properties Real Estate Investment Trust (TSX:APR.UN). At writing, the REIT offered an annualized yield of about 6.8% and paid its cash distribution every month. So let’s dig into why it might belong in an investor’s passive income TFSA.
About APR stock
APR stock owns dealership and automotive-service real estate across Canada and the United States. Its portfolio includes 95 income-producing properties spanning roughly 3.5 million square feet.
The REIT leases these properties to dealership operators, collecting rent while tenants typically handle many property expenses through net leases. Cars may change dramatically over time, but dealerships and service centres still need well-located buildings where customers can buy, maintain, and repair them.
Income
First-quarter rental revenue climbed 21.7% year over year to $29.1 million, supported by acquisitions and contractual rent increases. Adjusted funds from operations (AFFO) rose 19.1%, while AFFO per unit reached a quarterly record.
The REIT paid out about 78.6% of AFFO during the quarter, down from 81.4% a year earlier. That left room between the cash generated and the distributions paid, an encouraging sign for investors relying on the monthly income.
Management declared a monthly distribution of $0.07 per unit, equal to $0.82 annually. Investors looking beyond this one holding can also compare Canada’s top monthly dividend stocks.
Considerations
At a recent price of about $12.05, a $7,000 investment would buy 580 full units. That position could generate $39.73 per month, or $476.76 annually, assuming the distribution remains unchanged.
| COMPANY | RECENT PRICE | NUMBER OF SHARES | ANNUAL DIVIDEND | ANNUAL TOTAL PAYOUT | FREQUENCY | TOTAL INVESTMENT |
|---|---|---|---|---|---|---|
| APR.UN | $12.05 | 580 | $0.822 | $476.76 | Monthly | $6,989.00 |
Yet there are risks. APR stock carries debt and remains sensitive to interest rates. Acquisitions can expand cash flow, but borrowing too aggressively could weaken the balance sheet. The REIT also depends on a relatively specialized group of dealership tenants.
A slowdown in vehicle sales may pressure dealership operators, although service departments can provide steadier demand. Monthly payments are appealing, but they should never convince investors to skip the balance-sheet homework.
Bottom line
APR stock combines a 6.8% yield, monthly cash payments, full occupancy, and improving distribution coverage. TFSA investors seeking meaningful income from this year’s contribution could collect nearly $477 annually while the REIT continues expanding its property portfolio.
The stock deserves a place on the watch list for investors comfortable with real estate and interest-rate risk, especially when market pullbacks push the yield higher.
