I’d Purchase This 3.3% Dividend Inventory in Bulk Earlier than the Subsequent CRA Audit Wave

With a possible wave of Canada Income Company (CRA) audits, some buyers may be feeling nervous about what’s sitting of their portfolios. Whereas the Tax-Free Financial savings Account (TFSA) protects you from taxes on capital beneficial properties and dividends, it doesn’t shield you from scrutiny, particularly in the event you’re seen as buying and selling slightly than investing. That’s why now may be a sensible time to double down on regular, income-producing belongings which might be clearly designed for long-term, hands-off investing. One dividend inventory that matches the invoice is Chartwell Retirement Residences (TSX:CSH.UN).

About Chartwell

Chartwell is a Canadian actual property funding belief (REIT) centered on senior housing. It operates throughout 4 provinces, managing a mix of impartial residing, assisted residing, and long-term care residences. The dividend inventory’s give attention to important housing and well being providers means it’s comparatively insulated from financial swings, and its core demographic of Canada’s ageing inhabitants is rising steadily. Once you’re searching for consistency and predictability, these are good issues.

The latest earnings report reveals that Chartwell is holding its personal in a difficult surroundings. For the primary quarter of 2025, income got here in at $252.9 million, up from $196.6 million a yr earlier. Similar-property web working revenue surged 21.3% to $70.5 million , and funds from operations rose 43.1% yr over yr to $56.2 million. That’s the sort of regular development that helps underpin its beneficiant dividend.

That dividend

Proper now, Chartwell pays a month-to-month distribution of $0.051 per unit, which provides as much as about $0.61 yearly. With the inventory is buying and selling round $18.50, that works out to a dividend yield of roughly 3.3%. That sort of revenue is difficult to disregard, particularly when it’s tax-free inside a TFSA.

However let’s not fake this can be a risk-free alternative. One of many greatest crimson flags with Chartwell is its payout ratio. Primarily based on Q1 web revenue of $33.2 million, the distribution represented about 155% of that quantity. Nonetheless, REITs are required to pay out a big portion of earnings, and lots of buyers give attention to money movement as a substitute. On that entrance, Chartwell’s FFO greater than covers the dividend, for now.

Issues

Debt is one other challenge to observe. Chartwell carries a major quantity of it, which isn’t uncommon for actual property funding trusts, however nonetheless value flagging. Its debt-to-equity ratio stays elevated. In a rising rate of interest surroundings, that may stress margins and restrict flexibility. Nonetheless, the Financial institution of Canada has paused hikes lately, and there’s rising hypothesis about cuts within the yr forward. If charges ease, Chartwell’s value of borrowing might come down, giving it room to reinvest or develop its dividend.

Yet one more factor to bear in mind is occupancy. Chartwell’s occupancy price hit 91.5% in Q1 2025, up 530 foundation factors from Q1 2024, displaying the pandemic-related weak spot is normalizing. As extra seniors return to neighborhood residing and healthcare considerations stabilize, that development ought to proceed.

Backside line

If the CRA goes to be extra aggressive with audits, the most effective technique is to make sure your TFSA is clearly aligned with long-term funding targets. A high-yield REIT that delivers secure month-to-month revenue and serves a vital demographic makes a powerful case. Chartwell isn’t flashy, and it’s not a development rocket, however on this surroundings, that may be precisely what your TFSA wants. Particularly with only a $10,000 funding paying out $636 annually!

In brief, I’d load up on Chartwell earlier than the audit highlight begins to shine brighter. It’s regular, tax-efficient, and performs a vital position within the Canadian housing panorama. For a TFSA investor searching for revenue with readability, it checks all the fitting bins.