Watching a stock lose value can be frustrating, especially when you bought it to generate a reliable income stream. But a falling share price doesn’t necessarily mean the business has lost its ability to reward investors. Sometimes, the market becomes so focused on near-term challenges that it overlooks a company’s long-term growth potential. That’s why I believe it’s important for Foolish investors to look beyond the recent performance of a stock before giving up on a dividend investment.
In this article, I’ll highlight one such Canadian monthly dividend stock that has fallen 17% over the last year but could still be a great buy for long-term passive income.
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A beaten-down Canadian monthly dividend stock to buy
The stock I’m talking about here is Canadian Apartment Properties Real Estate Investment Trust (TSX: CAR.UN), or CAPREIT. This Toronto-based real estate investment trust (REIT) owns and manages residential rental properties, with a portfolio of 45,386 suites at the end of September 2026.
After slipping 17% over the last year, CAPREIT stock currently trades at $31.07 per share with a market cap of $4.7 billion. At this market price, it offers a solid 5% annualized dividend yield, with distributions paid every month.
The recent weakness in CAPREIT stock largely reflects challenges in the overall Canadian rental housing market. Higher housing supply and slower population growth have affected rental demand, while rising mortgage refinancing costs and maintenance expenses are putting pressure on its profitability.
But is its financial performance that bad?
Despite these challenges, CAPREIT’s latest financial results clearly reflect that its underlying business remains resilient, even as some key metrics have weakened.
In the third quarter, CAPREIT’s diluted funds from operations (FFO) per unit fell 1.7% year-over-year (YoY) to $0.65, mainly due to lost income from property sales and higher interest expenses. However, lower trust and tax expenses, along with unit repurchases, helped partially offset these pressures.
Nevertheless, one major encouraging sign was the continued growth in its Canadian operations. The REIT’s Canadian operating revenue rose 2.2% YoY to $241 million, while Canadian net operating income improved by 1.2% from a year ago.
Despite the challenging rental environment, CAPREIT maintained a strong Canadian residential occupancy rate of 97.2%. Similarly, its average occupied monthly rent also climbed to $1,744 from $1,709 a year earlier, highlighting the resilience of its rental portfolio.
Why CAPREIT remains an attractive passive income stock
Beyond its rental portfolio’s resilience even amid difficult market conditions, CAPREIT’s manageable distribution payout makes this beaten-down stock even more appealing for long-term income investors.
In the September quarter, the REIT distributed $0.39 per unit, with an FFO payout ratio of 59.5%. This suggests that its distributions remain comfortably covered by FFO.
Another reason to consider CAPREIT at current levels is its focus on improving long-term returns through strategic property sales and unit repurchases. In the first nine months of 2026, it sold 612 suites for $195.7 million and bought back roughly 2.5 million units for $88.9 million.
Interestingly, its diluted net asset value stood at $52.94 per unit at the end of September, significantly above its current market price. While this estimated value doesn’t guarantee a near-term recovery in the stock price, it clearly highlights the potential appeal of buying CAPREIT units at current levels as it looks undervalued.
What could drive CAPREIT’s long-term growth?
Besides its attractive monthly income and resilient Canadian operations, CAPREIT’s ongoing efforts to improve operational efficiency could support a gradual recovery in profitability, which could drive its shares higher.
The REIT is refining its leasing practices, focusing on resident retention, and investing in technology and process improvements to strengthen its operations.
Although these initiatives may take time to deliver stronger results, CAPREIT’s valuable rental portfolio, manageable FFO payout ratio, and focus on improving its operations make it an attractive stock to buy and hold for long-term passive income.
