When it comes to monthly dividend payers, your options are quite limited when it comes to equities. Of course, screening out a stock by monthly versus quarterly dividends might exclude a ton of high-quality, dividend-rich value plays worth backing up the truck on. But, at the same time, income ETFs and REITs are terrific options for investors to get paid monthly. For the most part, though, I think that settling for a quarterly dividend payer and budgeting for each month is the best way to go.
While there are a handful of intriguing dividend stocks that pay monthly, it’s my view that the REIT space is home to the more rewarding (and cheaper) income options these days. Enter shares of CT REIT (TSX: CRT.UN), which is currently sporting a 5.8% distribution yield after correcting 11% from its past-year high.
CT REIT
Undoubtedly, the REIT, which is best known for housing the likes of Canadian Tire (TSX: CTC.A) retail locations, warehouses and distribution centres, isn’t the only play that’s been rolling down the hill lately. Indeed, the REIT scene was overdue for a correction like this, and while timing the bottom is hard to do, I do think that the slate of valuations is now quite intriguing, especially with yields back in a respectable spot, especially versus equities (most notably the big bank and insurance stocks, which are a bit short of yield these days).
For income investors who want one big, very high-quality tenant, rather than a slew of them that can negotiate lease terms when it comes time to renew (or not), I do think that CT REIT fits the bill as an underrated monthly payer that’s worth careful consideration, especially as the trade war between Canada and the U.S. pushes consumers towards the likes of a homegrown retailer with Canadian brands. Indeed, the “buy Canadian” mindset could work out in favour of Canadian Tire, which bodes well for its ability to make rent in any given month.
While capital gains may be harder to come by in REITs, especially if the Bank of Canada pivots and starts increasing rates after its lengthy pause and period of indecision, the distribution, I think, makes it worth the while, especially at these levels. At the end of the day, the star of the show with a name like CT REIT is the safe yield, rather than the appreciation potential. While a REIT will never be as safe as a GIC, I do think that the risk/reward is starting to look more attractive by the day.
With a ridiculously high occupancy rate of more than 99% and a very well-covered payout backed by a very conservative AFFO (adjusted funds from operations) payout ratio, my guess is that shares of CT REIT could be the first to be back on the ascent once the REITs are ready to move on after the latest correction “roadbump.”
The bottom line
As the bond market points to a “higher for longer environment” (and who can argue against that given the inflationary pressures that loom and the rate hikes they could inspire), the REITs may still be in for tougher sledding going into year’s end. But for investors looking for a deal, I’d look to best-in-breed names on the way down as you collect the payout and wait.