The ideal paycheque keeps arriving while its owner sleeps, vacations, or loses another argument with a self-checkout machine. Twelve deposits a year can make a Tax-Free Savings Account (TFSA) feel surprisingly similar to a second income stream, minus the second job.
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Why a TFSA
The Canada Revenue Agency generally doesn’t tax interest, dividends, distributions, capital gains, or withdrawals inside a TFSA. Withdrawals also won’t increase taxable income or reduce federal income-tested benefits, making the account particularly useful for retirement income.
The contribution rules still apply. The 2026 limit is $7,000, while someone eligible every year since 2009 who has never contributed could have $109,000 available. Unused room carries forward, but withdrawals only return as new room the following calendar year. Investors should check their personal room before contributing because the CRA isn’t known for enjoying surprise parties.
Monthly payments don’t automatically produce better returns than quarterly ones. They simply match recurring expenses more conveniently and allow cash to be reinvested sooner. The important questions remain whether the business generates enough cash to cover the payout and whether that income can grow.
A monthly REIT
Real estate investment trusts (REIT) can work particularly well here. REITs collect rent from their properties and distribute much of the resulting cash to investors. Adjusted funds from operations (AFFO) offers a useful estimate of recurring cash available after property expenses and maintenance spending.
CT Real Estate Investment Trust (TSX: CRT.UN) is therefore a great place to start. It recently closed at $18.77 with a new $0.08 monthly distribution, which annualizes to $0.98 per unit, producing a yield of approximately 5.2%.
CT REIT owns more than 380 Canadian properties covering 31.7 million square feet. Most are Canadian Tire stores and distribution facilities operating under long-term net leases, which generally leave the tenant responsible for many property expenses. That arrangement makes rent considerably more predictable than the average landlord’s Tuesday.
Earnings support
First-quarter occupancy remained 99.4%, while the AFFO payout ratio was 72.5%. That leaves a healthy portion of recurring cash available for debt, property investment, and unexpected expenses rather than sending every available dollar out the door.
Management demonstrated that confidence by increasing the monthly distribution by 3.5% for July. CT REIT has now grown its payout by more than 85% since its 2013 initial public offering. Three newly announced investments should also add approximately 129,800 square feet to the portfolio once completed.
The units trade around 14 times annualized first-quarter AFFO. That looks reasonable for a highly occupied portfolio with contractual rent increases, although investors shouldn’t expect growth-stock fireworks from a landlord collecting dependable rent. That said, they could expect strong income from even a $10,000 investment.
| COMPANY | RECENT PRICE | NUMBER OF SHARES | ANNUAL DIVIDEND | ANNUAL TOTAL PAYOUT | FREQUENCY | TOTAL INVESTMENT |
|---|---|---|---|---|---|---|
| CRT.UN | $18.77 | 532 | $0.9816 | $522.21 | Monthly | $9,985.64 |
At the current distribution, those units would produce approximately $43.52 each month. Reinvesting the payments could purchase additional units, allowing this member of the monthly dividend stocks club to build an increasingly useful TFSA paycheque.
Foolish takeaway
That said, Canadian Tire supplies roughly 91% of CT REIT’s annualized base rent. That relationship creates stability, yet one struggling tenant could affect almost the entire portfolio. Higher interest rates, refinancing costs, retail weakness, and property-value declines also remain risks, while distributions are never guaranteed.
I would therefore pair CT REIT with companies from other industries rather than make it the entire TFSA. Its covered 5.2% yield, rising distribution, and nearly full portfolio could nevertheless keep depositing cash while patient investors give both the properties and their monthly income room to grow.
