Retirees need reliable income to cover everyday expenses, but chasing high yields can be dangerous. Dividends are never guaranteed, and financially strained companies can cut or even eliminate their distributions. The challenge is finding investments that offer attractive income without taking on excessive risk.
Guaranteed investment certificates (GICs) provide capital protection and predictable interest income. However, one-year GIC rates currently range from about 3.6% to 4.0%, while longer-term options offer around 4.3% to 4.5%. Moreover, GICs typically pay interest annually or at maturity, making them less convenient for retirees seeking consistent monthly income.
That’s where quality monthly dividend stocks can come in. One Canadian income stock worth investigating is Choice Properties REIT (TSX: CHP.UN), which offers a 5% distribution yield and a portfolio built around essential businesses.
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Why Choice Properties offers defensive income
Choice Properties’ biggest advantage is its relationship with Loblaw, Canada’s largest grocery and retail operator. Loblaw, whose banners include Real Canadian Superstore and Shoppers Drug Mart, operates businesses that benefit from consumers’ recurring needs, even during economic downturns.
Importantly, Loblaw is Choice Properties’ principal tenant and majority unitholder, accounting for approximately 57% of its tenancy. This relationship provides a substantial foundation for rental income, supported by a tenant whose grocery and pharmacy operations are relatively resilient.
The REIT owns a substantial portfolio of approximately 699 properties covering 68.6 million square feet of gross leasable area. Its occupancy rate is nearly 98%, demonstrating strong demand for its properties. Approximately 73% of its net operating income (NOI) comes from retail properties, with 83% of its retail portfolio dedicated to necessity-based businesses.
These characteristics make Choice Properties particularly interesting for retirees who prioritize dependable income over aggressive share-price appreciation.
Stable financials support the monthly distribution
A compelling yield means little if the underlying business cannot sustain its distributions. Fortunately, Choice Properties has demonstrated encouraging operating performance.
In the first half of the year, same-property net operating income (NOI) increased 2.9%, while funds from operations (FFO) per unit grew 1.7%. Its distribution payout ratio of approximately 72% of FFO also suggests a reasonable cushion, leaving room to support its monthly payments while retaining some cash for growth and financial flexibility.
Another important advantage is its investment-grade BBB+ credit rating from S&P, reflecting its relatively strong financial position. For income investors, a solid balance sheet matters because it helps a REIT navigate higher borrowing costs and challenging economic conditions.
Nevertheless, investors should remember that Choice Properties is not a GIC. Its unit price can fluctuate, interest-rate changes can affect its valuation, and its significant reliance on Loblaw creates tenant concentration risk.
Is this 5% dividend stock worth buying?
At $15.48 per unit at writing, Choice Properties appears reasonably valued for investors seeking monthly income. Its units only climbed about 2% over the past five years, highlighting that its appeal is primarily income generation rather than growth from price appreciation.
Retiree takeaway
Choice Properties REIT combines a 5% yield paid out in monthly distributions, high occupancy, and necessity-based retail properties with a strong relationship with Loblaw.
Its financial performance and investment-grade credit rating further strengthen its income-investment appeal.
Retirees seeking dependable monthly cash flow should consider researching this REIT. Waiting for a market pullback could also provide a more attractive entry price and higher starting yield.
