Money makes money, and wealthy people know this. Thus, they initially work for money and keep putting it to work by investing in income and wealth-generating alternatives. You can earn passive income in the form of interest on loans, royalty on land, rent on property or vehicles, lease on equipment, or subscriptions. These methods require paperwork and carry default risk, maintenance and repair costs, advertising, and commission expenses. However, monthly dividend stocks have institutionalized these income sources.
This 10.5% dividend stock has been paying dividends for over 260 months
REITs have been a popular source of monthly income in Canada. The Toronto Stock Exchange has a variety of REITs, from commercial to retail, healthcare, residential, industrial, and more. Allied Properties REIT (TSX: AP.UN) is a commercial REIT in Canada. It owns 186 rental properties with a portfolio value of $8.6 billion. This converts into a net asset value of $39.99 per unit, 11% below the first quarter 2024 NAV of $44.84.
Commercial REITs generally have a lower occupancy rate, but they command higher rent. The pandemic affected most office REITs, forcing many to cut distributions and some to even stop paying distributions. Office REITs optimize their portfolio from time to time by selling low-yielding properties to buy high-yielding properties.
Allied Properties REIT increased its debt to $4.5 billion in the first quarter of 2025 from $3.7 billion a year ago to acquire three triple-A urban properties in 2024. This contracted its cash flow temporarily and increased the dividend payout ratio to 88.5% of funds from operations from 77.5% a year ago.
The REIT has properties worth $300 million held for sale. Once they are sold, the proceeds can be used to reduce debt. The macro-economic uncertainty due to US tariffs has slowed decision-making on long-term lease commitments. Although Allied is seeing steady demand for urban workspace, the macroeconomic uncertainty could delay long-term targets.
This risk has been priced into its stock and is therefore trading near its 2009 level. While many REITs’ unit prices have recovered as real estate prices stabilized, Allied Properties continues to trade 60% below its 2022 peak and at a 55% discount from its NAV. The discount is because the REIT continues to report losses in the fair market value of the property.
Who should invest in this 10.5% dividend stock?
Allied Properties REIT has been paying monthly distributions for the past 22 years without a single distribution cut. It survived the 2008 financial crisis and the 2020 pandemic with no dividend growth. In four out of the 22 years, it has not grown its dividends. For the remaining years, AP.UN REIT has grown dividends at an average annual rate of 2.2%.
While there is a risk of a 30–50% dividend cut if there is a delay in sale of properties held for sale, the dividend yield will still be above 5%. It could prove to be a value stock if the REIT can sustain the economic uncertainty.
Investors looking for a stable and regular monthly income could consider investing a large amount in this stock to earn a high yield and also be prepared for a possible dividend cut. The unit price has lower downside as the market has already priced in this risk. While investing in Allied Properties, also consider diversifying into a few low-risk dividend stocks, like CT REIT.
How to maximize your monthly cash flow
You can take advantage of the high yield from the stock price dip and reinvest the monthly cash flow to buy growth stocks. If you have $15,000, you can invest in Allied Properties REIT through your Tax-Free Savings Account (TFSA) and get $126 per month. You can use this dividend money to buy other low-risk dividend stocks. For $126, you can buy eight shares of CT REIT every month and compound your passive income.
If you buy eight units of CT REIT every month, you will have 96 units in 12 months, which can give $491 in annual dividends. CT REIT also offers the option of dividend reinvestment that can further compound your income. The money invested and reinvested can help you build multiple sources of income with just one-time investment of $15,000.