For investors who haven’t yet contributed $7,000 in their TFSAs this year or have already done so but haven’t yet bought anything, there could be a golden opportunity up ahead as market volatility makes its return just in time for the hottest part of summer. Indeed, the broader markets themselves have been just a bit overheated, to say the least, making this latest Thursday cooldown or turbulent spike in the tech sector less of a shocker and more of a healthy dip.
Of course, a correction can never be ruled out, especially after a lengthy bull market run. With geopolitical conflict sending oil prices rocketing higher again, questions linger as to whether it’s safe to be a net buyer of stocks with valuations still a tad on the high side while the list of worries grows longer again. Indeed, the last thing this market needed was higher transport costs, which could reignite inflation again, shortly after costs were mostly under control.
Time will tell if another wave of rate hikes will be in the cards, especially for the Bank of Canada, but either way, I think investing one’s TFSA cash in income plays, such as high-yield REITs (Real Estate Investment Trusts), could be the move as investors seek to steer clear of risk and volatility while gravitating towards durable passive income.
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SmartCentres REIT
In my view, the REITs look quite cheap right here, even after the modest run they’ve been on in the past year and a half. One higher-yielding name that looks worthy of a buy is SmartCentres REIT (TSX: SRU.UN), a retail REIT with a very nice 6.1% distribution yield. It’s a very durable cash cow with most locations anchored by highly defensive and resilient tenants (think Canadian Walmart (NASDAQ: WMT) locations) that bring in floods of foot traffic into the strip malls they’re located in.
Add residential projects into the mix, and it’s clear that SmartCentres’ aspirations go above and beyond just retail real estate. As the “SmartLiving” effort (think apartments, condos, and other residential properties) looks to bolster the asset mix while enhancing the retail assets, I wouldn’t be too surprised if the firm winds up raising its distribution at a decent pace over the next couple of years.
At the end of the day, SmartCentres REIT has one of the most outstanding yields out there. And with a $7,000 investment, investors would land about $35.00 per month tax-free. Of course, that doesn’t sound like a whole lot. But it does cover a few subscriptions and could help make any inflationary surges that much less painful.
Leaving passive income on the table with a 6.1% yield?
Of course, a 6.1% yield might seem like you’d be leaving quite a bit of money on the table, especially when you’ve got a name like Telus (TSX: T) that offers close to double, with a yield currently at 11.7%.
While I do like Telus and its $200 or so in quarterly dividend payments, I must say that I’d rather go with SmartCentres REIT, given stability at a time when markets are in quite a rattled state. Sure, Telus is the go-to bet for risk-taking income investors, but I want a steady bet that comes cheap.
