best canadian reits stocks best canadian reits stocks

The Investor’s Blueprint: 8 Key Considerations for Canadian REIT Stocks

Real estate investing is a lucrative business that can make property proprietors extremely wealthy. It is, however, time-consuming, worrisome, and capital-intensive. This is particularly true in the early stages of building a property, where it can quickly become a full-time job.

There is, however, a much easier method to invest in property for people seeking a passive investment. It needs less capital, takes less time, and frequently pays a large dividend. It’s known as a real estate investment trust (REIT), as well as we’ll explain what it is and how to engage in one below.

Let’s see the best Canadian Reits Stocks so that you can make a good return…

1. What Exactly is a Real Estate Investment Trust?

best canadian reits stocks
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A real estate investment trust, or REIT, is based on the mutual fund concept. The business strategy is to pool investment funds and manage properties ranging from townhouse apartments to industrial buildings on behalf of investors.

Investors’ low capital investment allows them to acquire exposure to a wide range of real estate, generating revenue and usually yielding a high dividend yield.

Because of their company structure, these trusts have large dividend yields. They must give out almost all of their earnings after expenses to stockholders. Typically, a REIT will return 85-95% of its earnings to stockholders.

As a consequence, REIT share prices and annual growth rates are not subject to significant volatility. If you began investing in 2020, you would have noticed that the spread of covid-19 caused havoc on the REIT sector, so there were profits to be made in their recovery.

However, now that the shares have recovered, we must consider these trusts as dependable income payers with a track record of consistent distribution growth. It is difficult for the business to generate strong capital growth because it must return the majority of its profits to shareholders.

2. 8 Best- Canadian Reits Stocks

best canadian reits stocks
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8 Best Canadian Reits have been listed below with their description:

2.1 CT REIT

The overwhelming majority of CT REIT’s (TSE: CRT.UN) revenue comes from licensing its real estate to Canadian Tire Corporation, which runs the Canadian Tire retail stores. The trust’s portfolio consists mainly of sites surrounded by a Canadian Tire department store, as well as non-Canadian Tire retail properties, distribution facilities, and mixed-use commercial property.

The epidemic had a significant financial impact on this REIT. However, fears were unfounded as Canadian Tire experienced a pandemic boom, resulting in a rise in e-commerce sales.

Occupancy rates remained stable, so this REIT was able to post respectable results throughout the pandemic. During the same period many other retail REITs, especially those concentrated on properties such as shopping malls, struggled significantly.

At the point of writing, the REIT had a total market value of around $3.8 billion, making it one of Canada’s biggest REITs. Because it is more established, development is expected to be slower, with analysts projecting a 5.8% annual increase in revenue over the next few years.

Although CT REIT isn’t showy, we don’t require it to be. Instead, you’ll receive rock-solid coverage percentages, one of the sector’s finest payout ratios, as well as a growing as well as high-yielding dividend with this fund.

CT REIT has an FFO-to-interest payout ratio that’s 2.7 as well as one of the smallest debt-to-asset ratios of any Canadian REIT at 0.19 at the time of writing. The dividend is paid out at only 68% of current funds from operations, and the yield is in the low 5% level.

It is a Canadian Dividend Aristocrat, having raised its dividend for ten years in a run. Dividend increases should be in the low single digits on an annual basis. Nevertheless, this is going to be the situation for the vast majority of REITs in Canada.

Overall, if you’re searching for a high-yielding, dependable retail REIT, CT REIT is one to consider.

2.2 Automotive Properties REIT

Automotive Properties REIT (TSX: APR.UN) is the obvious winner in terms of pure growth potential. This small-cap specialized REIT has a lot of upsides.

Vehicle Properties REIT purchases auto store real estate and then rents it back to operators.

Because the owners value stability, the business locks renters into long-term leases of a decade or more with rent escalators. A car dealership is much more difficult to relocate than a clothing business.

Since its initial public offering in 2015, the company’s inventory has more than doubled to 76 stores and a total of 2.8 million square feet of leasable space. The business owns properties from Alberta to Quebec and continually seeks to expand its network. There is still plenty of room for expansion. Various store operators are utilizing Automotive Properties to speed up their development prospects because they can expand much more quickly if they do not have to purchase the underlying real estate.

Dilawri Group, Canada’s largest auto dealership group, offers the REIT first dibs on any dealerships it purchases. The portfolio of Automotive Properties will grow as more dealerships are sold to these large operators, a pattern that is expected to keep happening over the next ten years.

Yes, COVID-19 has hampered the REIT’s growth plans, and reservations towards the automobile industry as a result of the pandemic may also hold this one back. However, these are long-term companies that place a premium on stability. They are not going to abandon these sites anytime soon.

Automotive Properties’ balance situation has improved over the last year. The company’s D/E ratio has dropped to 0.90 from a peak of 1.91 in 2019. The payout ratio of the business is also acceptable, as distributions account for just 84% of funds from activities.

Automotive Properties is presently trading at an amount equal to its net asset value, which adds to its allure.

2.3 Dream Industrial REIT

Right now, industrial real estate is a hot industry. E-commerce is sweeping the globe, with even big retailers like Walmart as well as Loblaw getting in on the action. It’s intriguing to consider that you no longer need to go to the supermarket to buy food. And this is only the commencement of a new trend.

As a consequence, everyone desires to have industrial properties that will benefit from E-commerce growth. More space for distribution will be required as more businesses embrace and expand their E-commerce platforms.

Dream Industrial REIT (TSE: DIR.UN) sticks out as one of the few REITs set to post double-digit revenue growth. After offloading some of its lower-quality holdings in 2019 and 2020, the REIT began 2021 with 177 properties. It utilized the earnings from the selling of the assets in question to pay down debt, and as of this writing, it has a ratio of debt to equity of 0.58, a debt-to-assets ratio of 0.34, and a ratio of interest coverage of 7.47. Dream Industrial can make several purchases in the years to come because it has so little debt.

The portfolio of the company comprises 258 assets totalling 46.5 million square feet of gross leasable area. It has expanded not only through purchases but also through rent increases. Rent costs have increased in small amounts over the last year.

To top it all off, after a few years affected by the pandemic, occupancy rates are rising. During the height of the pandemic, the fund’s occupancy rate dropped to the low 90% level, but it is now at 99%.

DREAM REITS EXPLAINED - Comparison of DRM.TO, D.UN, DIR.UN and DRA.UN

2.4 Canadian Apartment Properties REIT

In this uncertain climate, two REIT industries have performed particularly well: industrial and residential. Canadian Apartment REIT is the largest of the latter. (TSE: CAR.UN).

With a market cap of more than $8 billion, it is roughly on four occasions larger than its nearest competitor and the biggest REIT in the nation.

In Canada, Ireland, as well as the Netherlands, the business manages over 67,000 people in apartment rentals and housing sites.

Analysts predict a 7% average annual growth in revenue over the next few years, making it among the highest in the industry. It is worth noting that CAP REIT has increased revenue year over year for the past 23 years, which is the longest like streak in the industry.

This Canadian Dividend Aristocrat additionally established itself as one of the sector’s most dependable income stocks. It has the next longest increase in dividends streak in the nation, at 11 years, tied with Allied Properties.

Finally, among its rivals, Canadian Apartment has a single of the best financial profiles. It is among the top residential REITs in all debt-related areas. It additionally possesses one of the highest interest coverage ratios (2.24) among residential REITs, following only Killam Apartment REIT. (TSE: KMP.UN).

When you combine the company’s strong balance sheet, above-average growth rate, and consistent (and growing) shipping, you get a business that is ready to deliver for investors.

Before we go, it’s also worth noting the effect of rising rates of interest. While increasing interest rates may be a drag on many, particularly those with greater debt loads, REITs, particularly residential REITs, tend to perform well throughout times of rising rates.

The explanation for that is that as interest rates increase, so do property values. It can also pass on inflationary costs to renters via yearly rate increases.

So, while borrowing costs rise, affecting high-CAPEX sectors like REITs, the advantages outweigh the drawbacks, and investors should feel safe keeping through inflationary periods.

2.5 Allied Properties REIT

If you think that office REITs will make a comeback, Allied Properties (TSE: AP.UN) should be near the top of your list. Allied possesses one of the most robust asset portfolios, with a large presence in key urban areas.

The company’s total assets have surpassed $11.5 billion, representing a compound yearly rate of expansion of 26.4% as its initial public offering in 2003. 81% of those investments are in either Toronto or Montreal. The remainder of the portfolio is concentrated in major metropolitan areas such as Calgary, Edmonton, Ottawa, as well as Vancouver.

While the Office segment accounts for the bulk of Net Operating Income, the company also has a connection with Urban Data Centres (UDC), which accounts for low double digits of net operating income. This market is expanding rapidly because it is essential to Canada’s communication infrastructure. They will, in our view, become even more important as the globe becomes more digital.

The business is extremely diversified, and no single tenant accounts for a significant portion of revenue.

Allied is still selling at a 45% markdown to its NAV as of this writing. It has an appealing dividend and a well-covered distribution with an FFO payment ratio of 72%. Furthermore, Allied is one of only eight REITs to be designated as a Canadian Dividend Aristocrat. It has the second-longest dividend-growth record among all TSX-listed REITs, at 11 years and counting.

To top it all off, the company is undoubtedly one of the industry’s best-capitalized REITs. Among all Office REITs, it has single of the smallest D/EDBITA, D/E, as well as D/A rates. The interest coverage ratio for the business is 7.5.

While Allied is riskier as a workspace REIT, experts anticipate a 19% average annualized growth in revenue over the next few years. It is among the greatest of any REIT listed on the TSX. It has a powerful asset portfolio, an impressive distribution promise, and an impressive financial profile.

Allied Properties REIT Due Diligence Brief

2.6 GraniteREIT

Granite REIT is a real estate investment trust that acquires, develops, and manages industrial buildings in North America as well as Europe. Its portfolio includes buildings for manufacturing, administrative offices, warehouse as well as logistics, and product engineering.

The bulk of its properties is logistics and distribution warehouses, as well as multipurpose buildings. Granite REIT is a subsidiary of Magna International, which remains its primary renter.

Magna generates 60% of Granite’s overall revenue. Granite REIT has a diverse yet balanced geographical footprint in Canada (26% revenue), the United States (31% revenue), Austria (27% revenue), and Europe (15%). It holds 85 real estate investments with a total leasable area of 33 million square feet.

2.7 InterRent REIT ETF

InterRent owns and manages homes for over 12,000 Canadian families and is constantly expanding. They are an enthusiastic bunch of people who work well together and are allowed to use their talents to make a difference in their communities. The demand for rental apartments is constantly high, owing to several factors such as increased youth employment, an aging Canadian population, and extremely high net global migration.

The company’s primary goal is to expand in the GTA, Montreal, the National Capital Region, and other associated markets. Areas are chosen based on their capacity to meet the following parameters while contributing to the REIT’s growth-oriented strategy: healthy economic regional centers and neighbourhoods; regions with stable employment profiles generated by strong and sustainable industries; and regions with expected population growth.

Problems related to the environment, society, and governance (ESG) are woven into the fibre of their daily lives. They are enthusiastic about implementing sustainable projects, and their goal is to explore pilot projects to reduce their environmental impact. These initiatives help their inhabitants, provide opportunities for team development, and help to protect the environment by reducing energy consumption, improving waste and water management, and lowering GHG emissions.

2.8 H&R REIT

In terms of its market value and assets under management, H&R is one of Canada’s biggest REITs.

H&R was a diverse REIT with residential and commercial holdings headquartered in Toronto until the beginning of this year.

If you look at the stock chart, you may observe a significant and abrupt drop in the REIT’s price.

Shareholders decided in December 2021 to split off seventy percent of the company’s portfolio, which includes industrial real estate such as malls as well as additional retail buildings.

The REIT now concentrates primarily on residential property as well as has maintained a monthly dividend yield of 4.29%.

3. How do REITs Differ from Traditional Real Estate Investments?

REITs are an excellent option for those who do not have the time or money to make investments in real estate properties. In reality, in certain instances, REITs are far superior to actual estate investing.

The ability to engage in REITs rather than real estate is perhaps the most compelling reason to do so. You cannot easily convert your property assets into cash as a property owner. The procedure is cumbersome and costly, and it may take a while to complete.

REITs, on the opposite hand, move similarly to stocks. Simply log into the brokerage account you have, trade your REIT, and transfer the proceeds into your bank account. You may have to shell out commission on your transaction depending on your broker. Apart from that, the transaction is simple, and you will receive your funds the same day.

In terms of performance, it’s tough to compare a REIT’s capital gains to real estate equity. Certainly, based on where your personal property is, you can make a lot of money by selling it or renting it to others as a holiday home or apartment.

However, the real estate industry does not always benefit buyers. Overinflated home values, as we saw in the 2008 market crash, may come back haunting property owners.

While REITs do not appreciate as much as real estate properties, they additionally do not crash as severely. This is advantageous for those reluctant to take risks that want to reap the rewards of real estate but do not want to chance losing large sums of money.

4. Should You Engage in Real Estate Investment Trusts (REITs)?

REITs were established to assist ordinary investors in profiting from the market for real estate. They have built-in growth, and large payouts of dividends, and may even outperform stocks over extended periods in some cases.

They can be an excellent source of passive revenue as well as an option for a more hands-on approach to real estate.

As a result, investors should seriously consider introducing REITs to their investments, particularly if they’re looking for a high-yielding dividend stock.

The Takeaway!

This was all about the topic”8 Best Canadian Reits”. You can invest some of your money into the Reits stocks stated above. Check out 10 Best Stocks to Buy Right Now in Canada – A Complete Guide if you want to know about the 10 best Canadian stocks to buy right now in Canada.

Queries and Answers

Some of the most asked questions regarding the topic “Canadian Reits Stocks” are listed below:

1. Are Canadian real estate investment trusts safe investments?

Top-quality REITs, including Canadian REITs, have been the most secure and yielding real estate assets. This is because many REITs own high-quality, non-depleting assets and have used low rates of interest to lock in financing costs for extended periods.

2. Which REITs offer the best returns?

This month’s best-performing real estate investment trusts (REITs) involve Getty Realty Corp. (GTY), VICI Properties Inc. (VICI), as well as Gaming and Leisure Properties Inc. (GLPI), which have gained up to 25% in the last year despite a weakening real estate market in the United States.

3. Do Canadian real estate investment trusts have an obligation to distribute dividends?

While most US REITs pay quarterly dividends, the majority of Canadian REITs pay monthly. The Canadian government mandates real estate investment trusts (REITs) to withhold 15% of shareholder payments based on return on capital.

4. Do billionaires engage in real estate investment trusts (REITs)?

Summary. Many high-profile millionaires are currently stockpiling REITs. I outline five reasons why REITs are appealing to both billionaires and average investors. I’ll go over some of my top choices for REITs to make investments in 2023.

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