I’m Adding These 2 Monthly Dividend Stocks to My TFSA

Telus just slashed its dividends by 55%, highlighting the importance of a safe yield instead of a high yield. You may want to consider a defensive approach for your August investments in a Tax-Free Savings Account (TFSA). Grocery real estate investment trusts (REITs) tend to have safer monthly dividend payouts, easing your anxiety about whether you will get the same monthly payouts.

Three key indicators to look at in a monthly dividend stock

Dividend payout ratio: Almost all REITs give you this figure. It shows their total dividend payments as a percentage of operating cash flow. Now, REITs are required to distribute most of their earnings to unitholders to enjoy the tax-free status of a Trust. Otherwise, earnings retained in the trust are taxed at the maximum tax rate. Hence, a 75-85% payout ratio is common in REITs.

Interest coverage and indebtedness ratio: If REITs pay most of their rent, how do they fund new property acquisitions? Through debt. They issue debentures and take mortgages and term loans against their property portfolio to buy, develop, and intensify properties. The percentage of properties with debt shows the indebtedness ratio. The lower, the better. The operating income earned from properties should be sufficient to pay interest on the loan.

Occupancy and weighted average lease term: To forecast the stability of a REIT’s operating income, you should look at the occupancy rate and lease term. A higher occupancy and lease term mean assured income but limited scope for growing it. A lower occupancy and lease term mean an opportunity for new rent and renewal spread, but volatility in income.

Two monthly dividend stocks for TFSA

Here are two monthly dividend stocks from the real estate sector that have different operating structures, risks, and addressable markets.

CT REIT

CT REIT (TSX: CRT.UN) offers safe distribution income as 99.4% of its properties are occupied with a weighted average lease term of seven years. The rent is assured, as over 90% of the rent comes from the parent company, Canadian Tire. It also has a better net operating income, as it does not have to bear brokerage and marketing costs.

Other REITs often sell underperforming properties that are difficult to rent out or earn low rental yields. CT REIT’s organizational structure saves it from this risk as it only acquires properties that Canadian Tire owns or leases from a third party.

This brings us to the second key indicator: CT REIT has an indebtedness ratio of 39%, with an interest coverage ratio of 3.5 times its operating income. Both are healthy numbers, indicating debt is way less than its peers. A strong balance sheet and assured rental income help it grow dividends annually by 3% while keeping the payout ratio at 72.5%.

Slate Grocery REIT

Slate Grocery REIT (TSX: SGR.UN) doesn’t have as efficient a business model as CT REIT, but it enjoys the stickiness of tenants who are grocers. Its top two tenants are Kroger and Walmart, accounting for 18% of its rental income. Its occupancy ratio hovers between 93.6% and 94.4% with an average lease term of 4.4 years. This gives Slate Grocery room to increase its net income from existing properties through new leases and renewals. In the second quarter of 2026, its leasing spread was 16.7% for renewals and 41% for new leases, which helped it increase net operating income by 2.3%.

However, its indebtedness ratio was 54.9% and interest coverage was 1.9. The cash flow fluctuations keep its distribution payout ratio between 80% and 88%. Hence, Slate Grocery REIT does not grow its distributions. Since it operates in the United States, its distributions are calculated in U.S. dollars and paid to Canadian investors in Canadian dollars, bringing benefits from foreign exchange volatility.

Slate Grocery REIT compensates for no dividend growth with a 7.2% dividend yield. It is higher than CT REIT’s 5.34% yield. If you buy 100 units of each, your monthly payout will be around $10 from Slate Grocery and $7.9 from CT REIT.