Have you ever wanted to invest in real estate? It’s not easy and the barriers to entry can be high, especially if it is your first property.
Real estate has long been a vehicle where the wealthy park their money.
Not only does the land and property continue to appreciate as time goes on, but it is an asset that has real-life utility.
Unfortunately, unless you have a large sum of initial capital saved up for a down payment, buying real estate can be a difficult task.
Luckily, there is a way to invest in real estate through the stock market itself.
The REIT or Real Estate Investment Trust is a commonly overlooked investment asset that can be utilized to gain exposure to real estate.
If you love steady performance and a stable, generous dividend, there are plenty of Canadian REIT stocks investors can add to their portfolios.
Read on to learn about the best REIT stocks in Canada in 2022.
A REIT is a company that owns and operates real estate and generates income through rent payments from its occupants. This can include residential properties, retail properties, or even industrial properties.
Canadian REITs must have the property physically located within Canada and abide by special regulations that allow it to operate as a REIT.
To qualify as a REIT, the trust must pay at least 90% of its taxable income as either a dividend or distribution to shareholders.
In exchange for this generous payout, REITs are not required to pay any corporate taxes, and also get to own the property they collect rent on.
For shareholders, in exchange for owning units of the REIT, a healthy dividend or distribution is paid quarterly or even monthly depending on the REIT.
You can own these in any registered or non-registered account, although holding REITs in a TFSA or RRSP is a little more tax-friendly when it comes to collecting frequent dividends.
Here is a list of top Canadian REIT stocks to add to your portfolio.
1. H&R REIT (TSX:HR.UN)
H&R is one of the largest REITs in Canada in terms of market capitalization and assets under management.
Until the start of this year, H&R was a well-diversified REIT that had holdings in residential and commercial, based in Toronto.
If you’re looking at the stock chart, you might notice a significant and sudden decline in the REIT’s price.
In December of 2021, shareholders voted to split off 70% of the company’s portfolio which includes commercial real estate like malls and other retail buildings.
The REIT now focuses mostly on residential real estate and has maintained its 4.0% dividend yield that is distributed on a monthly basis.
In all, H&R currently has 414 total properties in its portfolio, valued at over $9 billion CAD.
2. Killam Apartment REIT (TSX:KMP.UN)
One of the largest residential REITs in Canada, the Killam Apartment REIT owns a $4.5 billion real estate portfolio with property across Canada.
The REIT itself is based out of Nova Scotia and was established back in 2000.
At the end of 2021, Killam’s portfolio consisted of 89% apartments, 6% manufactured home communities or MHCs, and 5% commercial.
Of these properties, 67% of them are located in Atlantic Canada, with 23% in Ontario, and 10% split between BC and Alberta.
The great thing about residential real estate? No matter how the economy is, people need places to live.
Killam REIT has gained an average of about 15% annually over the past five years, which doesn’t even include reinvested dividends which it pays on a monthly basis.
3. Dream Industrial REIT (TSX:DIR.UN)
This Toronto-based REIT was founded back in 2012 and has been one of the steadiest performers over that time.
As of the end of 2021, Dream Industrial REIT owned 239 industrial assets or 351 buildings that accounted for over 43 million square feet.
This portfolio is valued at over $5.7 billion and has an impressive 98.2% committed occupancy. This is essential because it means that nearly all of its properties are collecting rent.
Dream Industrial REIT operates warehouses and fulfillment centers, as well as other industrial buildings.
With a rock-solid balance sheet, minimal debt, and a keen eye for acquisitions, Dream Industrial is a solid addition to your portfolio.
The REIT also has a stellar 4.25% dividend yield and pays out its distributions on a monthly basis.
4. Riocan REIT (TSX:REI.UN)
Riocan is not only one of the most well-known Canadian REITs, but it is also one of the largest by market cap and asset value.
As of September 2021, Riocan had an enterprise value north of $13.8 billion, and currently has a market cap of just under $8 billion. Riocan owns a nice variety of different properties, with a focus on retail buildings.
The company owns 214 different properties in its portfolio and has an impressive 96.4% committed occupancy rate, with 91.4% of these properties in Canada’s six largest markets.
Riocan pays out a monthly dividend with a 3.98% yield.
5. Slate Office REIT (TSX:SOT.UN)
Yet another Toronto-based REIT that was founded in 2012, Slate Office REIT is as it sounds: a portfolio of corporate, high-quality workplaces.
At the end of 2021, Slate owned a total of 55 properties worth over $2 billion across North America and Europe.
You might be thinking that offices aren’t a great investment following the COVID-19 pandemic, but Slate focuses on high-quality tenants like government agencies.
Across all of its properties, Slate has an average remaining lease term of 5.7 years and pays out a monthly distribution of a generous 7.85%.
6. Canadian Apartment Properties (TSX:CAR.UN)
Are you starting to see a pattern here? Residential REITs offer the stability of owning income rental property without the hassle of being a landlord.
Canadian Apartment Properties is another popular REIT that currently has the largest market cap of any Canadian REIT at $9.4 billion.
The company has over 70,000 rental properties in its portfolio, with an impressive 98.6% residential occupancy rate in Canada.
Monthly rent cheques are great for REITs because it means shareholders usually get monthly distributions.
Canadian Apartment Properties is no different, with a monthly payout and annual yield of 2.67%.
7. Boardwalk REIT (TSX.BEI.UN)
Boardwalk REIT has a long history of performing well for Canadian investors, aside from a sharp decline a few years back after its Alberta portfolio got hit hard.
Since then, Boardwalk REIT has more than recovered and has over 33,000 properties in its portfolio.
Boardwalk has been a steady performer throughout the pandemic and is currently trading at its 52-week high prices.
Boardwalk management is also putting its money where its mouth is with 26% of shares owned by insiders which is a fairly high percentage.
Boardwalk’s distribution isn’t as high as other REITs, with a monthly payout at a yield of only 1.77%.
8. Morguard REIT (TSX:MRT.UN)
Morguard was one of the hardest-hit Canadian REITs during the pandemic, as it has a large exposure to retail properties like malls and strip malls.
Morguard is certainly diversified, with 46 properties across six Provinces in its portfolio. These 46 properties have a total area of 8.3 million square feet and are valued at over $2.5 billion.
Morguard is trading at a discount right now, with its stock price less than half of what it was pre-pandemic.
There should be optimism that Morguard can rally once restrictions are lifted and they should be able to reinstate the previous higher dividend yield in the future.
9. Summit Industrial Income REIT (TSX:SMU.UN)
A relatively unknown Canadian REIT, Summit Industrial owns 159 different warehouses and industrial centers around Canada.
One of the best parts about Summit is that it has high-end customers like Home Depot and Coca-Cola occupying its property.
It also provides some exposure to data centers, one of the only Canadian REITs to provide this.
Summit pays a decent but not spectacular 2.46% yield and pays out distributions on a monthly basis.
10. Smartcentres REIT (TSX:SRU.UN)
Smartcentres is a massive industrial REIT that owns over 174 properties in Canada valued at over $11 billion. A majority of its properties are retail-oriented, with shopping centers and malls being critical to its portfolio.
Smartcentres has a 97.6% occupancy rate across its properties, and rents to some of the biggest companies in the world including the likes of Costco, Home Depot, Lowe’s, Dollar Tree, and H&M.
Smartcentres has one of the better distributions as well with a monthly payout at a yield of 5.62%.
Investing in the top REIT stocks in Canada is a piece of cake. These assets trade just like regular stocks or ETFs, so all you need to do is search for the ticker symbol, and hit the buy button!
REIT stocks with high dividends are excellent stabilizers in your portfolio and can add a sense of stability during volatile times.
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Unfortunately for Questrade users, REITs do not fall under the ETF category, meaning trading commissions are charged on transactions.
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Qtrade is a popular Canadian trading platform that offers all of the above-mentioned REIT assets for you to add to your portfolio.
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Absolutely! REITs are underappreciated in the investing world, and I believe they have a place in any diversified portfolio.
Canadian investors will love Canadian REIT stocks due to their stable prices, steady growth, and generous monthly or quarterly distributions.
These are just ten of dozens of the top dividend REITs in Canada that can help form the bedrock of your long-term portfolio.
As an investor, it’s always difficult to build a portfolio with both stocks and real estate property. Now, you know exactly how to combine the best of both worlds into a single investment.
So far 2022 has been a bumpy ride for investors, as market volatility has wreaked havoc on our portfolios.
Adding assets like REITs to your portfolio can help keep your head above water and provide a much-needed cash flow that is so valuable during economic uncertainty.
By investing in both residential REIT stocks and commercial REIT stocks, investors can ensure that their portfolios are further diversified and safe from downturns in any one specific sector or industry.
Are REITs better than stocks?
The two assets are very different in terms of behaviour and long-term goals. Stocks hold the potential for growth, while REITs won’t show as much short-term growth but can provide excellent cash flow to build up your portfolio.
Which is better: REITs or REIT ETFs?
It will come down to personal preference here. One thing to take note of is that REIT ETFs trade for free on some trading platforms like Qtrade or Wealthsimple so it might be worth taking a look if you use one of these platforms.
Which Canadian REITs should I avoid?
There aren’t many to avoid per se, but in times of economic downturn avoiding REITs that focus on retail spaces like shopping malls or entertainment outlets like movie theatres may be a good choice. These REITs will be the ones most likely to struggle to collect rent and have struggling tenants when fewer consumers are spending money.
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