CRA Update: How to Build Your Own $2,000/Month CERB

You can build your own $2,000 monthly CERB from a high-yield asset like the RioCan REIT stock. However, you should also consider the risks and align your risk appetite with your investment choice.

| More on:

The federal government in Canada has announced with finality that the Canada Emergency Response Benefit (CERB) is over. Based on the Canada Revenue Agency’s (CRA) website, the last eligibility period is from August 30, 2020, to September 26, 2020.

Canadians have ways to build a personal replacement to the $2,000 monthly CERB. If you’re serious about improving your financial situation and depend less on federal aid, dividend investing is the way to go.

Eligibility periods

The CRA follows eligibility periods when dispensing the crisis money. A CERB eligibility period is specific for four weeks. When you apply for CERB, you will receive a $2,000 monthly for the period that you applied for.

The program doesn’t renew automatically, so an eligible CERB claimant must apply for each separately. Five periods have elapsed since the first eligibility period (March 15 to April 30, 2020), and the CRA is currently releasing payments for the sixth eligibility period (August 2 to August 29, 2020).

By August 30, 2020, the CRA will reach the seventh and last eligibility period, ending on September 26, 2020. It was a well-designed program for Canadians meeting the eligibility criteria. The CERB payments need not be consecutive, but if you received the maximum $2,000 monthly for six months (24 weeks), you would not be eligible anymore.

There were inadvertent payments during the implementation of the program. The confusion in the early days resulted in double-payments. Hence, if the CRA finds out you were ineligible, the tax agency will get back the money or demand repayment. Still, CERB served its purpose, and millions of displaced Canadian workers are thankful.

High-yield option

The ending of CERB should motivate Canadians to look after their financial health after the pandemic. Building a CERB-like payment is possible through dividend investing. But earning an equivalent to $2,000 monthly CERB will not come instantly. You need to save and raise the seed money to pursue this option.

RioCan (TSX:REI.UN), for example, is trading at less than $15.52 per share and offering a generous dividend of 9.19%. You would need $261,155 in capital to produce $2,000 monthly. It’s a tall order if you don’t have the required amount. However, it’s better to start small than not invest at all. Over time, your money should accumulate.

When picking dividend stocks, a high yield is not the only consideration. It would help if you looked into the nature of the business and the safety of dividends. A business reversal could lead to a dividend cut. RioCan is a $4.93 billion real estate investment trust (REIT) and one of the largest REITs in Canada.

The REIT has 221 properties in its real estate portfolio but is retail-focused. Since most of the tenants are non-essential businesses, the first half of 2020 was the most challenging for this REIT. RioCan reported a net loss of $350.8 million versus the $253 million in profit during the same period in 2019.

Know your risk appetite

RioCan’s balance sheet remains strong due to sound capital management. It’s an excellent dividend play, but the risks are profound as we advance. However, there are other safer choices, although dividends are lower. Your investment should align with your risk appetite.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Christopher Liew has no position in any of the stocks mentioned.

More on Dividend Stocks

dividends can compound over time
Dividend Stocks

Want a 7% Yield? The 3 TSX Stocks to Buy Today

These TSX stocks are offering high yields of over 7%, making them attractive for investors seeking steady passive income.

Read more »

how to save money
Dividend Stocks

The Smartest Dividend Stocks to Buy With $200 Right Now

These smartest dividend stocks can consistently pay and increase their dividends in the coming years, irrespective of the macro uncertainty.

Read more »

Electricity transmission towers with orange glowing wires against night sky
Dividend Stocks

3 Utility Stocks That Are Smart Buys for Canadians in November

These utility stocks benefit from regulated businesses and generate predictable cash flows that support higher dividend payouts.

Read more »

Start line on the highway
Dividend Stocks

Invest $10,000 in This Dividend Stock for $600 in Passive Income

Do you want to generate passive income? Forget the rental unit! This option will save you the mortgage yet still…

Read more »

Senior uses a laptop computer
Dividend Stocks

1 Reliable Dividend Stock for the Ultimate Retirement Income Stream

TD Bank (TSX:TD) shares are way too cheap with way too swollen a yield for retirees to pass up right…

Read more »

A worker drinks out of a mug in an office.
Dividend Stocks

Is Brookfield Infrastructure Partners a Buy for its 4.75% Yield?

Brookfield Infrastructure Partners (BIP) has a 4.75% dividend yield. Is it worth it?

Read more »

TFSA (Tax-Free Savings Account) on wooden blocks and Canadian one hundred dollar bills.
Dividend Stocks

Where to Invest Your $7,000 TFSA Contribution

The TFSA is attractive for investors who want to generate tax-free passive income.

Read more »

The TFSA is a powerful savings vehicle for Canadians who are saving for retirement.
Dividend Stocks

TFSA Investors: 3 Dividend Stocks Worth Holding Forever

These TSX stocks have the potential to grow their dividends over the next decade, making them top investments for TFSA…

Read more »