TF:CC - Want $300 in Super-Safe Monthly Dividend Income? Invest $42000 in the Following 3 Ultra-High-Yield Stocks

2024-03-20 21:30:00 ET

The time is ripe to invest in your future monthly paycheques coming in the form of dividends. The high-interest rates have been putting downward pressure on some good dividend stocks. The falling stock price has nothing to do with dividends, as their payouts are safe and within the guided range of their free cash flow. It makes them attractive stocks to buy at a bargain price for a safe monthly payout without working.

Three stocks whose monthly dividends are safe

Timbercreek Financial – 9% yield

The stock of short-term real-estate lender Timbercreek Financial ( TSX:TF ) is trading at a 19% discount from its April 2022 price level when the interest rate hike began. However, it surged 25.7% from its October 2023 level when the US Fed interest rate hike cycle paused.

I am stressing the negative correlation between Timbercreek Financial’s stock price and interest rate momentum to give you an idea of what an interest rate cut could mean for the stock. TF earns money from interest and loan processing fees it charges borrowers. A higher interest rate helped the lender earn higher interest income from its short-term loans. But it also increased the number of Stage 2 and 3 loans. The higher interest income offset the slowdown in new loan originations, hinting that TF has reached the peak of its interest income.

The next growth cycle will come when interest rates fall, encouraging REITs to start funding their development plans from short-term loans. That will boost loan volumes and bring in higher processing fees. While TF stock has partially recovered from the downturn, it still has the potential to rally to a price of $9.50.

Slate Grocery REIT – 10.5% yield

Slate Grocery REIT ( TSX:SGR.UN ) manages 117 properties in America, where it lends to grocers. The falling property prices reduced the fair market value of Slate Grocery REIT’s property portfolio by US$50 million, resulting in an 84.4% decline in its 2023 net income . But that did not affect its funds from operations as the REIT continued to earn rent. In fact, it earned a 10.4% higher rent on renewed leases.

As we saw in TF, many commercial REITs paused their development and expansion plans amid high-interest rates. Slate Grocery REIT also kept its debt flat by making no new acquisitions in 2023 after acquiring over 40 properties in 2022. The REIT is expanding cautiously, balancing its interest coverage (2.7x) and distribution payout (81.1%) ratio. When the interest rate cut begins, the REIT will get financial flexibility to buy new properties. Its portfolio’s value will also appreciate as the property market recovers.

The grocery REIT has the fundamentals to hold off the real estate downturn and pay monthly distributions. The REIT is trading at a 33% discount from the April 2022 level, with a 13% recovery from its October 2023 bottom.

CT REIT – 6.3% yield

CT REIT ( TSX:CRT.UN ) can give you safe monthly payouts as it gets over 90% of its rent from parent Canadian Tire . Canadian Tire deducts rental expenses and reduces its tax bill. The REIT pays out a significant portion of the rent as distributions, making it taxable in the hands of shareholders. This arrangement helps Canadian Tire maximize its returns in a tax-efficient manner. And you can benefit from it too, as it is among the few REITs that grow their distribution by 3% every July.

How to earn a $300 monthly dividend income

Now is a good time to buy the above stocks and lock in a high annual yield. If you want a $300 monthly dividend income, you could consider the following diversification of your passive income portfolio.

Even if you don’t have $42,000 to invest, you can invest $1,000 every month in each of the three stocks throughout the downturn and build a high-yield portfolio.

The post Want $300 in Super-Safe Monthly Dividend Income? Invest $42,000 in the Following 3 Ultra-High-Yield Stocks appeared first on The Motley Fool Canada .

Fool contributor Puja Tayal has no position in any of the stocks mentioned. The Motley Fool recommends Slate Grocery REIT. The Motley Fool has a disclosure policy .

2024