I Found a 5.6% Dividend Stock That Pays Monthly, Like an ATM for Your Retirement

With a 5.6% annualized yield, growing rental income, and monthly payouts, this Canadian REIT could help turn your retirement portfolio into a reliable income source.

Jitendra Parashar

Author Bio Jitendra Parashar is a financial journalist who has been writing for The Motley Fool Canada since June 2020. With more than 13 years of experience in financial journalism, equity research, and market analysis, he helps investors understand market developments and identify long-term investment opportunities. Before joining The Motley Fool Canada, Jitendra spent several years at Market Realist covering U.S. equities, major economic developments, and developments in the automotive and technology industries. He also worked in commodity and currency research at brokerage firms, gaining insight into how economic trends, central bank decisions, and geopolitical events influence financial markets. Jitendra writes for beginner investors, dividend seekers, and Canadians looking to build wealth over the long term. He also contributes to the daily TSX Today series, explaining key Canadian market developments and highlighting news investors should watch. Based in India, Jitendra follows Canadian and U.S. markets closely. Outside of work, he enjoys travelling in the Himalayas, street and nature photography, and exploring programming and artificial intelligence. Education MBA in Finance and International Business Bachelor's degree in Journalism Areas of Expertise Canadian and U.S. financial markets, long-term equity investing, dividend investing, macroeconomic and geopolitical trends, automotive stocks, emerging technologies, and artificial intelligence. Social Media Profiles LinkedIn Muck Rack Favorite Investment Quote “Simplicity is the master key to financial success.” — John C. Bogle

Published October 15, 9:15 pm EDT

When it comes to retirement planning, it’s not easy to build a portfolio that can keep paying you long after your working years are over. But I think one of the simplest ways to approach that goal is to own quality stocks that generate recurring cash flow and share part of it with investors.

Monthly dividend stocks could be especially useful because their payment schedules line up more closely with everyday expenses. If I wanted a stock to help replace a monthly paycheque, I’d consider CT Real Estate Investment Trust (TSX: CRT.UN). This Canadian REIT offers an over 5% annualized distribution yield, supported by rental income from a portfolio of hundreds of commercial properties. Its occupancy rate looks solid, while cash flows continue to climb. That’s the kind of financial support I’d want behind a retirement income investment.

In this article, I’ll explain why CT REIT’s monthly distributions, strong occupancy, and continued property investments could help provide cash flow throughout retirement.

customer uses bank ATM — Source: Getty Images

A top monthly dividend stock for retirement planning

As a Toronto-based real estate investment trust (REIT), CT mainly collects rental income from a large portfolio of commercial properties across Canada. Its portfolio includes 380 properties covering approximately 32 million square feet, mostly single-tenant retail locations. And Canadian Tire is its largest tenant.

At the time of writing, CT REIT traded at $17.17 per unit with a market cap of about $1.9 billion. While its units have slipped 7% over the last three months, they’re still up 6% from a year ago. Meanwhile, its underlying rental business has continued growing.

At this market price, CT REIT offers an attractive 5.6% annualized dividend yield, with distributions arriving monthly. Its latest declaration set the September distribution at $0.08 per unit, payable October 15. That payment is equal to $0.98 per unit yearly. So, if you buy roughly 5,000 units, you could collect approximately $409 every month, adding up to nearly $4,908 in yearly passive income.

For retirement investors, this regular monthly income could be really useful when planning everyday expenses.

Could CT REIT sustain its monthly payouts?

Of course, receiving monthly cash feels even better when the stock you’re relying on is performing well. And CT REIT’s solid fundamentals give investors several reasons to remain optimistic.

In the second quarter, the trust’s property revenue rose 4.6% year-over-year (YoY) to $157 million. Its net operating income also climbed 4.8% YoY to $124.7 million, backed mainly by contractual rent increases and contributions from acquired and expanded properties. As a result, CT REIT’s quarterly net profit jumped 22.6% YoY to $126.2 million, due partly to higher investment property valuations, although rising expenses offset some of those gains.

More importantly for income investors, CT REIT’s adjusted funds from operations (AFFO), a measure used to assess dividend payout capacity, climbed 3.3% YoY to $78 million. What’s even more encouraging is that the REIT’s AFFO payout ratio stood at 72.7%, suggesting that the trust generated enough recurring earnings to comfortably cover its distributions.

More growth opportunities for retirement income

During the second quarter, the REIT completed a $13 million investment in a Canadian Tire store and gas bar in St. Catharines, with an expected initial yield of 6.9%. It also completed $76 million worth of previously announced acquisitions and property expansions, adding roughly 232,300 square feet to its portfolio. These investments included an Edmonton property acquisition and Canadian Tire store expansions across British Columbia, Ontario, and Quebec.

Another positive is CT REIT’s impressive 99.5% portfolio occupancy rate at the end of June. Its indebtedness ratio also improved to 38.9% from 39.8% a year earlier, strengthening its financial position.

Overall, given its growing rental income, strong occupancy, and well-covered monthly distributions, CT REIT looks like an attractive retirement income stock to consider, even though future payouts aren’t guaranteed.