A 5% Dividend Stock to Buy for $100 Every Month

Here’s a 5% dividend stock that can generate $100 every month from a large portfolio of real estate properties spread across Canada.

Demetris Afxentiou

Author Bio Demetris has a professional background in business and technology and has been writing about Canadian markets and personal finance for The Motley Fool Canada for more than a decade. His investing journey has evolved from mutual funds and precious metals to individual stocks, cryptocurrency, and long-term wealth-building strategies. Over the years, his interest in the market led him to discover what he calls “everyday stocks”: quality businesses that people interact with regularly but may not realize they can invest in and potentially earn income from. Demetris focuses on helping investors understand the businesses behind the stocks they own and build practical portfolios aligned with their financial goals. His approach to investing centres on making thoughtful choices today to create greater financial freedom in the future. Areas of Expertise Canadian stocks Dividend investing TFSAs RRSPs Real estate investment trusts (REITs) Personal finance Cryptocurrency Long-term wealth building

Published October 23, 8:30 pm EDT

Have you ever thought about what you could change if you had an extra $100 every month? There are plenty of great investments on the market that can generate that amount from dividends. But there are fewer that can offer a recurring monthly income from a 5% dividend stock.

One option that meets that goal is RioCan Real Estate (TSX: REI.UN), and here’s how this 5% dividend stock can fit into your portfolio.

A woman stands on an apartment balcony in a city — Source: Getty Images

The business behind this 5% dividend stock

RioCan is one of the larger REITs in Canada. The company owns a portfolio of necessity-based retail properties in metro markets across Canada.

The business model is easy to understand. RioCan owns the properties and rents them out. Tenants pay rent to operate from those locations, providing RioCan with a recurring revenue stream.

For investors, the appeal is like being a landlord without handling the mortgage, property taxes or tenant issues. The properties are located in high-demand markets, house necessity-based retailers and generate a steady flow of traffic.

Adding to that appeal is RioCan’s mixed-use portfolio. These properties are typically residential towers sitting atop several floors of commercial retail. The buildings are in metro markets along transit lines, generating considerably more traffic and demand for both the retail sites and the area.

Turning to results, RioCan shows us how that model is working. In the most recent quarter, RioCan reported retail committed occupancy hit 98.8%. During the quarter, RioCan also reported same-property net operating income growth of 4.3%.

RioCan reported core funds from operations (FFO) of $0.40 per unit during the quarter. That was a 5.3% improvement over the same period last year. Core FFO gives investors a clearer picture of RioCan’s ongoing earnings by excluding items that can distort net income.

RioCan’s core FFO payout ratio for the 12 months ended June 30 was 73.8%. This means that distributions accounted for almost three-quarters of earnings.

More importantly, this means that RioCan has some room between what it earns and what it distributes.

Buying RioCan for $100 in monthly income

One of the main reasons why investors turn to RioCan is for that monthly distribution. As of the time of writing, RioCan offers a monthly payout of $0.10 per unit each month, which works out to $1.16 per year, or a yield of 5.4%.

For an investor who can drop $25,000 into RioCan (as part of a larger, well-diversified portfolio), that will work out to an income of just over $110 each month.

Those investors who aren’t ready to draw on that income, or cannot invest that amount, can opt for a smaller amount and allow compounding to grow that position.

By way of example, a $5,000 investment will generate an annual income of just over $260. That’s not quite $100 each month, but it is enough to generate a new share each month from reinvestments.