Create the Perfect TFSA With Your Own $75 Monthly Payout

Whether you are a new investor or already have years of investing experience, building a Tax-Free Savings Account (TFSA) around a specific monthly income goal can help keep your strategy focused. The exact monthly payout depends on how much you invest, but the basic formula is simple. By combining consistent contributions with high-quality dividend stocks, you can also steadily increase your monthly tax-free income over time.

As a result, a dependable monthly dividend stock could gradually turn your TFSA into a personal income stream. In this article, I’ll highlight one such monthly dividend stock and explain why it could help you build the perfect income-focused TFSA.

CAPREIT stock

For investors who want to turn a TFSA into a monthly income source, Canadian Apartment Properties Real Estate Investment Trust (TSX: CAR.UN), or CAPREIT, could be worth a closer look on the TSX today.

If you don’t know it already, CAPREIT is Canada’s largest publicly traded rental housing provider. At the end of the March quarter, it owned about 45,400 apartment suites and townhomes, excluding roughly 200 suites classified as held for sale. Most of its portfolio is located in Canada, with a smaller presence in the Netherlands.

Its stock currently trades at $34.64 per share with a market capitalization of about $5.3 billion. Although the stock has declined around 25% over the last year and is trading just 4% above its 52-week low, its growth outlook looks strong, making it look undervalued based on its long-term outlook.

On the brighter side, the recent weakness in its stock has pushed the real estate investment trust’s (REIT) annualized dividend yield higher to roughly 4.5%.

What has driven this weakness?

The recent decline in CAPREIT stock appears to reflect pressure across the residential real estate sector and some softer operating trends. The REIT’s Canadian residential occupancy slipped to 97.1% in the March quarter from 97.9% a year ago. Monthly rents on turnovers and renewals also rose by only 1.8%, compared with 3.4% in the same quarter of the previous year.

Still, its first-quarter results showed that the core Canadian portfolio remains resilient. Notably, CAPREIT’s same-property occupied average monthly rent rose 2.9% year-over-year (YoY) to $1,726, while Canadian same-property net operating income inched up by 2% YoY.

Similarly, the trust’s diluted funds from operations increased 1.7% last quarter to $0.595 per unit. Growth in same-property income and unit repurchases backed this improvement.

Focus on growth efforts

Interestingly, CAPREIT continues to recycle capital by selling selected properties and improving the quality of its remaining portfolio. It recently completed the privatization of European Residential REIT in May, giving it more control over the timing of future European asset sales.

Moreover, the REIT continues to maintain a stable financial position to support its long-term strategy. In the latest quarter, its total debt to gross book value rose to 40.3% from 37.7% a year ago, but the trust considers this level prudent and within its target range while continuing to prioritize a strong balance sheet and healthy liquidity.

Overall, CAPREIT’s discounted unit price, monthly payouts, and improving Canadian margins make it an appealing TFSA income stock right now. Investors also get the chance to collect monthly cash while waiting for the market to place a higher value on its large rental housing portfolio.

Generate monthly passive income inside your TFSA

At the current 4.5% annual dividend yield, an investment of about $20,000 in CAPREIT could generate roughly $900 in annual distributions, or about $75 each month. Grow your investment to around $30,000, and that monthly income climbs to roughly $113. Since those distributions will be earned inside a TFSA, eligible income stays tax-free, making it easier to reinvest every payment or use the cash for everyday expenses while your investment still has room to grow over time.