A Perfect TFSA Stock: A 6.9% Yield With Constant Paycheques

TFSAs are great wealth-building tools that can provide decades of tax-free compounding, provided that investors choose the right TFSA stock. This makes it appealing for investors who are seeking consistent, tax‑free income.

Fortunately, the market is full of great picks that are ideal TFSA stock candidates, offering a mix of growth and income-generating potential.

REITs are great examples of investments that can provide that growth and income. Specifically, Slate Grocery REIT (TSX:SGR.UN) is a unique pick that offers monthly distributions, a high yield, and growth potential.

For investors looking at the ideal TFSA stock to buy, that’s a hard-to-ignore option.

Why Slate fits a TFSA income strategy

Slate Grocery REIT owns and operates grocery-anchored commercial real estate. This means that Slate’s portfolio of properties is built around retailers that sell essential items.

That necessity part is important. People can delay buying many things based on how the budget is going, but food and household necessities are on another, more important level.

That doesn’t make Slate completely immune to risk, but it does make the REIT one of the more defensive options for investors considering a TFSA stock.

And inside a TFSA, that defensive appeal matters. The TFSA is set up for long-term, tax-free growth. Investments and reinvested distributions can compound tax-free. That stability means that investors don’t need to chase high-growth stocks or unrealistic yields.

Slate’s business is also simple to understand. Slate owns properties and rents space to tenants, many of which are grocers. The tenants pay rent, and that supports Slate’s monthly distributions.

For investors who want a TFSA stock that produces income without requiring constant trading, that simplicity is a major part of the attraction.

Slate’s portfolio mix adds a different layer

Another important point to note about Slate has to do with the locations of those grocery-anchored properties. This adds a defensive layer to the REIT’s income profile.

That’s because Slate’s portfolio of properties isn’t in Canada, but in the U.S. That’s an often-dismissed point that warrants mention.

An investor may already own Canadian banks, telecoms, utilities, or domestic REITs in a TFSA. Slate gives those investors a unique opportunity to own a different type of real estate exposure, tied to U.S. retail properties and U.S. consumer markets. That gives investors U.S. real estate exposure through a Canadian-listed REIT, while keeping the income sheltered inside a TFSA.

Another key aspect to note is the diversity of those businesses. Apart from the grocery anchor tenants, Slate’s properties include smaller secondary tenants. These are the restaurants, banks, pharmacies and medical offices that are located on the same property, often next to the main grocery tenant.

For a TFSA portfolio built around income, that mix is valuable. It provides an additional, complementary revenue stream for Slate and generates foot traffic, translating into improved results fueling that distribution.

A 6.9% yield with monthly distributions

One of the main reasons why investors turn to Slate is for the monthly distribution that it offers. At 6.9%, that distribution is among the highest-paying options on the market today.

To put that into context, a $7,000 investment in Slate is enough to generate several new shares from reinvestments each month. Over a longer period, that can compound into a powerful income engine within a TFSA.

Inside a TFSA, that compounding can accelerate long-term income growth.

Another key point to note is the monthly cadence itself. Monthly distributions are easier to budget for, making them ideal for passive-income investors, too.

Is Slate the perfect TFSA stock?

Slate can be a strong TFSA stock for the right investor. It offers monthly income, a high yield, and exposure to grocery-anchored real estate.

That makes Slate especially interesting for investors using a TFSA to turn regular contributions into long-term monthly income.

In my opinion, Slate is a great TFSA stock to consider in any well-diversified portfolio.

Buy it, hold it and watch your future income grow.

The post A Perfect TFSA Stock: A 6.9% Yield With Constant Paycheques appeared first on The Motley Fool Canada.

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More reading

• How to Use a TFSA to Bring in $1,000 a Month – Completely Tax-Free
• The Best, Simple Way to Turn $21,000 Into Consistent TFSA Cash Flow
• An Ideal TFSA Stock Paying 6.9% Each Month
• The Ideal TFSA Stock for June Paying 6.9% Each Month
• 7% Dividend Stock: Is it Now Too Immense to Ignore?

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