One of the best investments in a Tax-Free Financial savings Account (TFSA) for producing recurring revenue are dividend shares. All dividends earned contained in the account are tax-exempt, supplied you comply with the principles. Many Canadian firms pay dividends quarterly, whereas a number of, together with actual property funding trusts (REITs), pay month-to-month.
There’s no excellent funding, however a Canadian-based REIT targeted on the U.S. market will be a great TFSA inventory. Slate Grocery (TSX:SGR.UN) attracts income-oriented buyers because of its month-to-month payout frequency and hefty yield. Right this moment, the share worth is $14.69, and the dividend yield is 8.19% ($1.20 annual dividend per share). With $14,000 in obtainable TFSA contribution room, you may earn $95.55 in tax-free month-to-month revenue.
Defensive asset class
Slate Grocery is a defensive holding owing to its almost 100% grocery-anchored property portfolio in U.S. markets with sturdy demographics. Among the many anchor tenants of this $868.6 million actual property funding belief are six of the highest seven U.S. grocers, together with American retail giants Kroger and Walmart. The REIT owns and operates 116 properties in 23 states.
The REIT believes that even in a weaker economic system and the presence of e-commerce marketplaces, Individuals will proceed to depend on neighbourhood buying centres for his or her day-to-day wants. In-store buying accounts for 89% of grocery gross sales. Slate forecasts on-line grocery gross sales to develop to 12.4% of whole gross sales by 2027.
Beneficial fundamentals
Necessity-driven tenants and nationwide grocers constantly entice foot visitors no matter financial cycles, which is a bonus for the REIT. Extra importantly, the basics of the grocery sector stay beneficial. Excessive building prices and tight lending circumstances additionally hamper new retail growth and availability.
In accordance with Blair Welch, CEO of Slate Grocer, the constrained provide allows landlords to retain present tenants and implement significant fee will increase as lease contracts expire. Nonetheless, Slate maintains below-market rents. The common in-place hire is $12.77 per sq. foot in comparison with the market common of $24.
Slate has important room for continued hire will increase, which ought to lead to long-term revenue progress. Welch additionally notes that emptiness charges throughout the sector are traditionally low. On the finish of the second quarter (Q2) of 2025, the portfolio occupancy fee is 94%. The portfolio weighted common lease time period is 4.5 years.
Sturdy volumes and rental spreads
Slate’s rental income and web revenue within the first half of 2025 elevated 1.7% and 5.6% 12 months over 12 months to US$105.5 million and US$29.2 million, respectively. Notably, the consecutive quarters of sturdy leasing volumes at enticing spreads proceed to drive same-property web working revenue progress. Q2 has additionally marked one other consecutive quarter of double-digit renewal spreads. Within the post-pandemic interval, the common free money movement from 2021 to 2024 is US$59.25 million versus US$37 million in 2020.
Dividend historical past
Slate Grocery prioritizes rental progress from below-market leases over aggressive enlargement to make sure sustainable month-to-month distributions. Nonetheless, Welch expects the sturdy pipeline of latest leasing alternatives to help secure occupancy within the coming quarters.
Month-to-month paycheck
TFSA buyers can be completely happy to know that this pure-play grocery-anchored REIT has not missed a month-to-month distribution since June 2014. By investing at the moment, you’d have an ideal TFSA inventory that converts your funding right into a month-to-month paycheck.
