Creating a reliable stream of passive income is a financial goal for many Canadians. The Tax-Free Savings Account (TFSA) stands out as an excellent tool to achieve this in a tax-advantaged way. By carefully selecting the right dividend-paying stock or investment, you can generate tax-free income and potentially see your investment grow over the long term. One such investment to consider for your TFSA is CT Real Estate Investment Trust (TSX:CRT.UN).
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Why CT REIT
CT REIT is a real estate investment trust (REIT) that primarily focuses on owning and managing a diverse portfolio of commercial properties located across Canada. A significant portion of its leasable space is occupied by Canadian Tire, which provides the REIT with a stable and dependable stream of rental income. As of writing, the trading price for a unit of CT REIT was $14.49 Canadian. The trust offers its unitholders a monthly distribution of $0.0771 Canadian per unit. When you add this up over the course of a year, it equates to an annual distribution of approximately $0.93 Canadian per unit.
One of the appealing aspects of CT REIT for income-seeking investors is its history of consistently increasing its distributions to unitholders. For example, last year, the trust announced a 3% increase in its distribution. This track record of distribution increases demonstrates the trust’s commitment to providing a growing income stream to its investors over time. This can help to offset inflation and further enhance the attractiveness of the investment.
Looking at the trust’s recent financial performance, in its most recent earnings report for the fourth quarter of 2024, CT REIT reported net income attributable to its unitholders of $91.5 million Canadian. This represents an increase compared to the $89.1 million Canadian reported in the same period of 2023. This steady financial performance reflects the underlying stability of the trust’s property portfolio and its ability to generate consistent income from its tenants.
Making income
Investing in CT REIT through your TFSA offers not only the benefit of a steady and potentially growing income stream that is tax-free, but it also provides the potential for capital appreciation over the long term. REITs like CT REIT can see the value of their underlying property holdings appreciate over time. This can contribute to the overall growth of your investment within your TFSA.
Let’s consider how this might translate into passive income within your TFSA. If you were to invest $15,000 Canadian in CT REIT at the current price of $14.49 Canadian per unit, let’s see what that could translate into each year.
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY | TOTAL INVESTMENT |
| CRT.UN | $14.50 | 1,035 | $0.93 | $962.55 | quarterly | $15,000 |
From dividends alone, investors could gain $962.55 in annual income! It is important to keep in mind that while CT REIT has demonstrated a strong track record of performance and stability, all investments carry some level of risk. Real estate markets can be influenced by a variety of factors, including broader economic conditions, changes in interest rates, and local market dynamics. However, CT REIT’s strategic focus on high-quality, well-located properties and its strong anchor tenant relationship with Canadian Tire provide a level of inherent stability that can be particularly appealing to investors who are primarily focused on generating reliable income.
Bottom line
Allocating $15,000 of your TFSA to CT REIT at its current unit price could generate approximately $962.55 Canadian in annual tax-free income. Plus, you can benefit from the added potential for future distribution increases and long-term capital appreciation. This combination of income generation and potential growth makes CT REIT a compelling option for Canadians seeking to build a reliable and tax-efficient passive income stream within their Tax-Free Savings Accounts.
