This perfect TFSA stock yields 5.5 percent annually and pays cash every month

If you’re a Canadian investor, you probably spend a fair amount of time on… Canadian band (TSX:CTC.A). But while you’re buying windshield wiper blades or a new air fryer, you might be missing out on a much better deal: owning the building you’re in through a generous Real Estate Investment Trust (REIT) that grows and enriches the monthly passive income of your Tax Free Savings Account (TFSA).

CT Real Estate Investment Trust (TSX:CRT.UN) is the landlord that owns most of the real estate where Canadian Tire stores are located. The trust, a carve-out of the retailer’s real estate portfolio, will remain a development partner of the specialty retail giant as it expands its footprint across Canada. This explains CT REIT’s consistent portfolio growth, which supports rising monthly dividends, currently yielding 5.5% annually.

The REIT recently downgraded its financial and operating results for the fourth quarter of 2025 (Q4 2025), and for passive income-seeking investors, the report was a perfect set of cash flow numbers and strategic developments.

CT REIT’s stellar Q4 2025 earnings: Fortress-level monthly distribution stability

CT REIT’s latest annual report shows why it’s the gold standard for monthly passive income. The trust retains full occupancy. It ended 2025 with an incredible occupancy rate of 99.5%, up from 99.1% at the end of 2023. The portfolio has remained resilient throughout economic cycles. The anchor tenant, CTC, comprises 90.7% of the trust’s base rent. When your anchor tenant is one of Canada’s most iconic retailers with an investment-grade balance sheet, the rent checks usually arrive on time.

The REIT has increased its leasable area by 893,000 square meters of new gross leasable area (GLA) over the past year. Real estate income rose for the 12^e year in a row since the IPO. Operating income continues to grow and adjusted operating resources (AFFO) per unit increased 2.9% over the past year. AFFO measures sustainably distributable cash flow from REIT activities, and CT REIT is generating more of this as it maintains full occupancy while expanding the total leasable area of ​​its portfolio.

CRT.UN dividend data Ygraphs

CT REIT’s monthly distribution policy is conservative yet generous. The trust’s AFFO payout ratio for 2025 was comfortably at 73.5%. While other higher-yielding Canadian REITs may struggle with payout ratios approaching 95 to 100%, CT REIT has a huge cash flow cushion. This allowed it to increase benefits for twelve years in a row. It’s likely that monthly payouts will continue to rise well into the foreseeable future, increasing your TFSA’s monthly passive income generating capacity.

Why REITs are perfect for the TFSA

In a standard non-registered investment account, REITs are a tax reporting headache. Because CT REIT is a trust, the monthly cash payout is a mixed distribution which are generally taxable at your average personal income rates.

In a taxable account, you must track components such as:

1. Other income: This is taxed at your high marginal rate. This component exceeded 95% of CT REIT distributions for the first time in 2024.
2. Return of Capital (ROC): Tax deferral, but reduces your adjusted cost basis (ACB). Ultimately, you pay the CRA in the form of a larger capital gain when you sell the position.
3. Added values: Only 50% taxable, but one more line item to keep track of.

The weights of the components vary every year. It can be difficult to keep track of these tax items with each REIT distribution (or income trust) in your non-registered account each tax season.

By putting CT REIT into your TFSA, you are effectively blindfolding the CRA. ROC doesn’t interest you. You don’t worry about keeping track of the cost basis. And you don’t care about the March 31 T3 briefs. Every cent of that 5.5% return ($0.07903 per unit per month) ends up in your account as pure, disposable cash.

An undervalued TFSA monthly income-producing asset

At a recent price of $17.16, CT REIT shares were trading at a discount of 7.4% to their most recent net asset value of $18.53 as of December 31, 2025.

Factoring in the trust’s growing funds from operations (FFO), CT REIT’s forward price-to-FFO (P/FFO) multiple of 12.4 times appears undervalued for a steadily growing, fully occupied retail property portfolio with a low debt ratio of 39.8%. Multiples between 13 and 15 times would still be reasonable for this high-quality, monthly income-producing REIT asset.

The silly bottom line

For TFSA investors building a retirement income portfolio, CT REIT is the ultimate ‘set it and forget it’ monthly income machine. It offers a 5.5% yield, a twelve-year streak of annual distribution increases, and a payout backed by a 73% payout ratio, all without tax complexity.