Market volatility, rising inflation, and inflating debt have been stressing the real estate sector, with several REITs slashing dividends. A new name has entered the list, and this time it’s in the grocery sector. Slate Grocery REIT (TSX: SGR.UN) suspended monthly distributions as management works to improve financial and strategic flexibility. While there were signs of risk, as its dividend payout ratio was 113% of adjusted funds from operations (after adding leasing and improvement costs), a dividend pause came as a shock.
I was expecting a dividend cut as the REIT’s grocer tenants, Kroger and Walmart, brought credibility. However, Slate Grocery REIT’s debt and rising costs show that inflation and a weak balance sheet can even stress GIC-like rental income. This raises the question of which dividend stock you can trust for a second paycheque.
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A dividend stock that could become your second paycheque
It is not a good strategy to invest all your money in one stock just because its yield or return is high. Not every high-return stock is safe. Consider diversifying your investments across sectors to ensure regular payouts.
One dividend stock you can count on for regular payouts is CT REIT (TSX:CR.UN). Unlike other REITs that slashed dividends because of a high payout ratio, CT REIT has been gradually reducing this ratio. It was 72.5% in the first half of 2026. What sets this REIT apart is that more than 90% of its rental income comes from Canadian Tire, its parent company.
Rising costs are not a concern for CT REIT as it does not pay brokerage or advertising expenses. Any new property it buys or intensifies is for the parent, which gives assurance of occupancy. Its direct leasing cost fell 4.1% year-over-year in the first half of 2026.
CT REIT has eliminated the two biggest risks of lower occupancy and higher expenses. As for debt, more than 90% is interest-only unsecured debenture debt, and even that debt is 38.9% of its total assets, compared with Slate Grocery’s 55%.
What to expect from CT REIT?
Firstly, CT REIT offers a monthly distribution from the rental income it receives from Canadian Tire. Secondly, it grows these distributions at an average rate of 3% every July. The higher dividend is funded by the 1.5% annual rent increase in Canadian Tire and the higher rent from the intensifications. And lastly, CT REIT offers a dividend reinvestment plan (DRIP) with a 3% bonus on the dividend amount reinvested. So, if you reinvest a $100 dividend, DRIP will add CT REIT units worth $103.
What to look for when investing in dividend stocks?
While CT REIT has robust fundamentals, it is exposed to concentration risk. With 90% dependency on Canadian Tire for rental income, CT REIT’s fate is tied to Canadian Tire’s financial stability. This very strength of having a powerful parent becomes an equally powerful risk.
If the parent company faces financial stress, it will pass it on to the REIT because of its high exposure. So far, Canadian Tire has a strong balance sheet and profits. It is also expanding stores under its True North strategy.
Slate Grocery REIT’s dividend suspension is an eye-opener that no stock is a buy-and-forget. You should review your portfolio stocks even if they gave good returns in the past. Review doesn’t mean looking at the stock price and the unrealized profit and loss that appears on a broker’s app. Look at the fundamentals of the company in which you have invested a substantial amount and are relying on its dividends as a second paycheque.
For dividend stocks, look at the dividend payout ratio as a percentage of adjusted funds from operations (AFFO), as that includes leasing and improvement costs. While these costs are not regular, they are real. If the property is an old construction, high improvement costs can eat into rental yields.
Investor takeaway
CT REIT is a strong dividend stock to invest. However, investors should periodically review its fundamentals to see if the REIT maintains this strength. Over the period, consider investing in dividend kings with different risk exposure, like Canadian Natural Resources and Royal Bank of Canada. Energy and banking sectors have different risks than the real estate market.
