A Perfect TFSA Stock: A 5% Yield with Constant Paycheques

Most investors use their TFSAs for one clear objective: to establish a predictable, growing tax-free income stream. And while there’s more than a few stocks on the market that can cater to that goal, there is one that can offer consistent income, which makes it the perfect TFSA stock to own.

That stock is RioCan Real Estate (TSX:REI.UN), and here’s a look at why it belongs in your TFSA portfolio.

Why RioCan fits inside a TFSA

RioCan is one of the largest REITs in Canada, offering a portfolio of both commercial retail and mixed-use residential properties. As a TFSA stock focused on generating income, RioCan excels as a long-term pick.

For TFSA investors focused on long‑term passive income, RioCan offers one of the most dependable payout streams in Canada.

Part of the reason for that can be traced back to the properties that RioCan generates income from. The shift in recent years from less commercial retail and more towards residential has padded RioCan’s portfolio with more necessity-based tenants.

Not only does this bolster the defensive appeal of the REIT, but it also helps RioCan to continue generating a stable, recurring monthly income stream. Prospective investors should note that within a TFSA, both the contributions and dividends are completely tax-free.

For TFSA account holders who want to avoid volatility and prioritize predictable results, this combination of stability and tax‑free income is hard to beat.

A reliable 5.6% yield delivers steady income

RioCan offers investors a monthly distribution that, as of the time of writing, works out to an attractive 5.6% yield. This makes RioCan one of the better-paying options on the market, appealing for both those looking to draw on that income as well as those still building their nest egg.

By way of example, given the current yield and stock price, investors who purchase $7,500 worth of RioCan stock will generate more than one share a month through reinvestments alone.

As a core TFSA stock, it can quickly compound into a significant income stream over the longer term. In short, RioCan’s payout offers an attractive and steady paycheque that can support long‑term financial goals.

Inside a TFSA, RioCan’s monthly distributions can compound tax‑free, accelerating the growth of a long‑term income stream.

RioCan’s business supports long‑term income

RioCan’s portfolio is built around retail‑anchored and mixed‑use properties. Both have a strong emphasis on tenants that provide essential goods and services. This includes grocery stores, pharmacies, and other necessity‑based retailers that withstand economic slowdowns.

As a Canadian REIT with a defensive tenant base, RioCan provides the predictable cash flow that TFSA investors value most.

RioCan’s mixed-use properties have another advantage. Not only do the properties blend essential retail with residential units, but they are also located along transit corridors in major metro markets.

This bolsters both foot traffic and demand for those units, which, in turn, supports higher occupancy and rising rents. Adding to this, RioCan’s retail tenant mix includes some of the largest national retailers that come with longer-term leases.

This adds yet another attractive element for income-focused investors seeking that TFSA stock to own.

Why RioCan is the TFSA stock to buy now

For investors building a TFSA income strategy, RioCan offers a compelling combination of stability, yield, and long‑term reliability. And while every stock has some risk, RioCan’s large, defensive portfolio of quality tenants in prime markets minimizes that risk.

RioCan is a solid TFSA stock to add to any well-diversified portfolio. It can provide either a recurring income stream or the reinvested distributions to build one.

In short, RioCan stands out as a TFSA stock that can deliver consistent results for years to come.

The post A Perfect TFSA Stock: A 5% Yield with Constant Paycheques appeared first on The Motley Fool Canada.

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More reading

• How to Turn Your TFSA Into a Reliable Monthly Income Machine
• How Splitting $30,000 Across Three TSX Stocks Could Generate $2,092 in Annual Dividends
• How to Build a $50,000 TFSA That Pays You Consistently
• A Practical Way to Use Your TFSA to Generate $300 a Month – Tax-Free
• How to Use a TFSA to Earn $500 a Month — Completely Tax-Free

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