The TFSA, or Tax-Free Savings Account, is a popular registered account in Canada. Introduced in 2009, the TFSA is tax-sheltered, which suggests any returns generated in the account are exempt from Canada Revenue Agency (CRA) taxes.
The CRA has raised the TFSA contribution limit for 2024 to $7,000 increasing the cumulative contribution room to $95,000. For TFSA couples, the maximum contribution limit will double to $190,000 next year.
Due to its tax-sheltered status, the TFSA is an ideal account to hold undervalued dividend stocks that pay shareholders a tasty yield. In addition to a steady stream of dividend income, you can also benefit from long-term capital gains.
Here’s one such high-dividend TSX stock you can buy and hold in the TFSA right now.
Is Slate Grocery REIT a good buy?
Slate Grocery (TSX:SGR.UN) owns and operates a portfolio of grocery-anchored real estate properties in the U.S. With US$2.4 billion in assets, it has real infrastructure across major metro markets south of the border.
Interest rate hikes in recent months have dragged shares of Slate Grocery and several other capital-intensive real estate investment trusts lower. Currently, shares of Slate Grocery are trading 34% below all-time highs, raising its forward yield to 10.1%.
In the third quarter (Q3) of 2023, Slate Grocery completed 690,000 square feet of total leasing. Additionally, new deals were done at 18.4% above comparable average in-place rent, while non-option renewal spreads were strong at 14.8% above expiring rents.
At US$12.37 per square foot, Slate Grocery’s average in-place rent is well below market, providing a significant runway for continued NOI (net operating income) growth and stable cash flow generation.
These numbers highlight Slate Grocery’s strong leasing fundamentals and rental spreads, which continue to drive income growth higher. The company also ended Q3 with an occupancy rate of 94%, an increase of 90 basis points since the start of 2023.
Slate Grocery’s net operating income also trends positively, rising by 2% in the last year after adjusting for redevelopments. It is also well positioned to navigate the current environment of higher interest rates, as a majority of debt is fixed at a weighted average interest rate of 4.2%.
Priced at nine times forward earnings, Slate Grocery stock is quite cheap and trades at a compelling valuation in 2023. Part of a recession-resistant sector, Slate Grocery’s widening base of cash-generating assets should help it maintain dividends across market cycles.
The Foolish takeaway
An investment of $40,000 in Slate Grocery stock will help you buy 3,484 shares of the company. Given a monthly payout of $0.098 per share, you will earn a dividend of $341.43 each month, translating to an annual payment of roughly $4,100.
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY |
| Slate Grocery | $11.48 | 3,484 | $0.098 | $341.43 | Monthly |
Moreover, Slate Grocery stock trades at a discount of 17%, given consensus price target estimates. So, after adjusting for dividends, total returns may be closer to 27% in the next 12 months. Investors should identify a portfolio of quality dividend stocks and allocate a portion of their TFSA contribution limit towards these companies to lower overall risk and benefit from diversification while creating a stable stream of passive income.
