I’d Put My Entire TFSA Contribution Into This 6% Monthly Passive-Income Stock

Your TFSA can collect monthly “rent” from SmartCentres’s shopping centres, without the calls about broken toilets.

Key Points
  • SmartCentres pays a monthly distribution that yields about 6.2% at recent prices.
  • The payout looks covered, but it uses most of the REIT’s cash flow.
  • High occupancy and new projects could help, yet debt and retail risk mean the income isn’t guaranteed.

Do you want the property income without the cash? Great news. Your Tax-Free Savings Account (TFSA) can become a tiny landlord without requiring you to fix a toilet, chase rent, or discover what tenants consider “normal wear and tear.” In fact, there’s one investment that can collect rent from shopping centres across Canada and send part of it to investors every month. That’s much nicer than unclogging anything.

woman checks off all the boxes

Source: Getty Images

Before you start

Before you go sinking that cash into a passive-income stock, there are a few items to consider. The 2026 TFSA dollar limit is $7,000. That amount is added to available contribution room, while unused room from earlier years carries forward. Investors should check their own records before contributing, since the annual limit isn’t necessarily the same as everyone’s personal room.

Dividends, distributions, and capital gains earned inside a TFSA can grow tax-free. Withdrawals are also tax-free and generally return as new contribution room the following calendar year. Better still, TFSA income and withdrawals don’t affect federal income-tested benefits such as Old Age Security (OAS) or the Guaranteed Income Supplement (GIS).

Monthly payments can make budgeting and reinvestment easier, although frequency doesn’t create safety. Investors still need dependable tenants, strong occupancy, manageable debt, and cash flow capable of covering the distribution. A payment arriving 12 times annually remains rather unhelpful if number seven arrives carrying a dividend cut.

SRU

SmartCentres Real Estate Investment Trust (TSX: SRU.UN) offers the combination I’d want from a monthly payer. The REIT owns value-oriented shopping centres, offices, rental properties, and self-storage facilities across Canada. Many locations are anchored by Walmart, and other retailers people visit even when household budgets feel grumpy.

SmartCentres stock reported 98% in-place and committed occupancy in May. High occupancy keeps rent flowing, while its enormous land portfolio provides opportunities to add apartments, storage facilities, and additional stores around existing properties.

That growth is already moving from blueprint to building site. A new Canadian Tire flagship location in Toronto should be handed over during the third quarter, while SmartCentres stock expects construction on new shopping centres in Kingston and Winnipeg to begin this year. Second-quarter results arrive August 6, giving investors a conveniently timed inspection.

The numbers

First-quarter distributions consumed 86.4% of adjusted funds from operations (AFFO), the REIT equivalent of cash earnings. That leaves some coverage, although hardly enough to start throwing cash around like confetti.

SmartCentres stock pays $0.15417 per unit monthly, or $1.85 annually. At the recent $29.81 unit price, that produces a 6.2% yield. Investing the full contribution and rounding down to complete units would create the following monthly passive-income position.

COMPANYRECENT PRICENUMBER OF SHARESANNUAL DIVIDENDANNUAL TOTAL PAYOUTFREQUENCYTOTAL INVESTMENT
SRU.UN$29.81234$1.85$432.90Monthly$6,975.54

That works out to approximately $36.08 per month, with $24.46 left uninvested. Reinvesting those distributions could gradually add units, allowing future payments to purchase still more units without consuming additional TFSA room.

Foolish takeaway

That said, SmartCentres stock carries considerable debt, making refinancing costs and interest rates important. Retail weakness, construction delays, tenant concentration, and a payout ratio with only moderate breathing room also deserve attention. The distribution hasn’t increased since 2022 and isn’t guaranteed.

I’d therefore place an entire annual contribution here only if the rest of my portfolio already provided diversification. If new retail and self-storage projects expand cash flow, today’s twelve monthly deposits could become the foundation for considerably more units and income in the years ahead.

Fool contributor Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool recommends SmartCentres Real Estate Investment Trust. The Motley Fool has a disclosure policy.

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