Dividend investing is one of the simplest ways to start building a retirement portfolio that could eventually generate income of its own. I like the idea of putting money into established businesses today, reinvesting their distributions while I’m still working, and gradually increasing the amount of cash those investments could provide later in life.
A Tax-Free Savings Account (TFSA) makes that approach even more appealing for Canadians because eligible investment income can generally compound without income tax.
But I wouldn’t confuse a high dividend yield with a strong retirement investment. The business behind those payments needs to be capable of supporting them through changing economic conditions. In this article, I’ll highlight a top monthly dividend stock in Canada that could be a worthwhile TFSA holding for investors working toward a more dependable retirement income stream.
The TFSA-friendly monthly dividend stock
If you’re planning to strengthen your TFSA’s monthly income stream this November, Choice Properties Real Estate Investment Trust (TSX: CHP.UN) could be worth a closer look. This Toronto-based real estate investment trust (REIT) owns and manages more than 700 income-producing properties across Canada, including retail, industrial, mixed-use, and residential properties.
Choice Properties stock has remained nearly flat over the last year and currently trades at $14.87 per unit with a market cap of $4.9 billion. At this price, it offers an attractive 5.2% annualized distribution yield, with payouts made every month.
Why I find it undervalued
Interestingly, the recent weakness in Choice’s unit price doesn’t necessarily reflect the performance of its underlying business and improving long-term growth outlook. In fact, Choice Properties continues to benefit from healthy demand for its properties and improving rental rates, making it look undervalued.
In the second quarter, the REIT’s funds from operations (FFO), a key measure of operating performance for real estate businesses, rose by 1% year-over-year (YoY) to $193 million with the help of higher rental income from existing properties. However, increased interest expenses, driven by higher borrowing costs and a larger debt balance, partially offset this growth.
Another positive was the REIT’s same-asset net operating income on a cash basis, which climbed by 2.8% YoY to $255 million during the quarter. Choice’s industrial portfolio delivered an impressive 5.8% increase, while the company’s mixed-use and residential segment posted 4.1% growth. These gains highlight the strength of its diversified real estate portfolio.
Solid occupancy rate and strengthening outlook
Meanwhile, the trust maintained a solid portfolio occupancy rate of 97.7% at the end of June. It also achieved a 19% increase in rental rates on long-term lease renewals, suggesting that demand for its properties remains healthy.
Beyond these encouraging operating trends, Choice Properties continues to take steps to strengthen its long-term growth outlook. For example, the REIT recently renewed 50 leases with Loblaw, covering 3.6 million square feet. These renewals secured an average rental rate increase of 8.8% and extended the leases by an average of five years, supporting future rental income.
Adding to the optimism, alongside KingSett Capital, Choice plans to acquire First Capital REIT. The broader transaction, valued at roughly $9.4 billion including assumed debt, received approval from First Capital’s unitholders in June.
Overall, Choice Properties’ high occupancy, improving rental income, and continued focus on expanding its property portfolio make it an attractive TFSA investment for November.