When you use the power of your tax-free savings account (TFSA) to generate income, consistency is everything. A stock that continues to do its job while you do yours. And if that stock also offers a high yield with monthly distributions, it becomes even more attractive to TFSA investors focused on passive income. That combination isn’t easy to find, but one TSX-listed real estate investment trust (REIT) is delivering just that.
In this article I will talk about Slate Grocery REIT (TSX: SGR.U), a reliable monthly dividend stock for TFSA investors that not only gives you exposure to everyday real estate, but also offers one of the most attractive yields on the market today.
A high yield monthly dividend share for your TFSA
If you don’t already know, Slate Grocery REIT is a Toronto-based company that owns and operates a portfolio of grocery-anchored retail properties in major U.S. metro areas. These are the places people go every week without thinking about it, like grocery stores, pharmacy stops, and everyday shopping spots.
After rising nearly 8% over the past year, this REIT is currently trading at $14.74 per unit with a market cap of approximately $873 million. What makes it particularly attractive to income-oriented investors is its excellent annualized dividend yield of 8.2%, with distributions paid every month.
A look at recent financial performance
Although Slate Grocery REIT has yet to report its third quarter results (expected on November 6), its operations continued to perform reliably in the second quarter, even in a market that showed mixed results in the real estate sector.
The company’s rental income rose 1.1% year-over-year (YoY) to $52.4 million during the quarter, while net operating income (NOI) for the same properties also rose 1.1%. Over a twelve-month period, the NOI for the same property saw better growth of 3.2%.
Last quarter, the REIT completed more than 423,000 square feet of leasing activity. Slate’s renewal leases were signed at 13.8% higher rates than previous ones, and new leases were signed at 28.8% above comparable rental rates locally. These strong rental differences showed that demand for the properties anchored in supermarkets continued.
Well positioned for long-term income and value growth
Interestingly, the average rent across the entire Slate portfolio is just $12.77 per square foot – almost half the national market average of $24. That gap leaves plenty of room to gradually increase rents as leases are renewed, without pushing tenants away.
In addition, the REIT operates in 23 US states and is heavily concentrated in fast-growing regions such as Florida, North Carolina and Georgia. These areas are experiencing continued population growth, which could help drive demand for local retail spaces anchored by essential services such as supermarkets.
With a 94% occupancy rate, limited new store construction in its markets and strong tenant retention, Slate Grocery REIT appears well-positioned to maintain stable cash flows over the long term, making it an even more attractive choice for TFSA investors.
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