REIT stocks stand for real estate investment trusts. When an investor buys a REIT, they are buying a share in a commercial real estate portfolio. These portfolios own income-producing commercial real estate and pay good dividends. Most of them also operate their properties.
Usually, REIT stocks will focus on a particular segment of the real estate sector. However, ETFs and other specialty REITs will be a mix of diversified properties. REITs are great for diversifying your portfolio.
REITs are great high income securities alongside banks. Income investors favour this security as they give access to real estate combined with more liquidity than traditional real estate investments.
How can you buy REITs?
REITs can be purchased in any investment portfolio through a portfolio manager or on your own using an online brokerage. We recommend Questrade if you want to go through an online broker. You can read more about why we think it’s the perfect platform for any Canadian investor.
Certain REITs will focus on a specific part of the real estate market, while others will offer a diversified batch, such as with an ETF.
REITs and Risk?
REITs are considered volatile depending on where we are in the economic cycle. Oftentimes, a downturn in the economy and housing can cause volatility in REIT stocks. Canadian REIT stocks are facing pressure as the housing market in Canada enters less certain times. Real-estate market fluctuations will affect REITs directly. In a recession, these stocks can underperform. In recent years, investors dealing with a low interest rate climate have favoured REITs for income.
Other things to keep in mind are that there are usually higher management fees than with other investment securities. It’s also important to know that there are tax regulations and there are legal structures that makes it harder for growth in capital appreciation. However, they do offer stable cash flow and diversification for your portfolio if you don’t already own real estate.
Here is our selection of Canadian REIT Stocks & ETFs…
iShares S&P/TSX Capped REIT (XRE-T)
A Canadian REIT that is dominated by RioCan (REI.UN-T) and H&R Real Estate (HR.UN-T). RioCan operates many Canadian shopping centres.
Protecting yourself if you are overweight in REITs? If you are concerned about this sector, he would Buy a Put. Option premiums, particularly in this sector, are quite low so it doesn’t cost you much to hedge your downside. Buying a Put Option; if the REIT goes down in value, the option will go up…
Horizons Equal Weight Canada Reit Index Etf (HCRE-T)
This Canada focused REIT tries to follow the performance of the Solactive Equal Weight Canada REIT Index. Rates are pausing and traditionally, REIT stocks have done well during this period.
REITs are in a good time right now. Rates are pausing or perhaps heading down but the economy has not fallen apart and this is when the REITs do well. It is a hiding place.
BMO Equal Weight REITs Index (ZRE-T)
They broke out in March and has continued to do well. They have a dividend yield of 4.32%.
Prefers that it is equal weight. That is the way to go. They will outperform cap weighted ETFs. REITs can still refinance at great rates. This whole interest rate thing has been way over done for REITs here.
Harvest Global REIT Leaders Income ETF (HGR-T)
This ETF centres on gold and gold producers. This ETF will benefit from higher gold prices and offer stability. A great choice to hold gold in a different way.
Good way to diversify outside Canada? Nice yield, but value will go down as interest rates go up, much like bonds. With dollar cost averaging over the next year, you might be OK.
Vanguard FTSE Cdn Capped REIT (VRE-T)
This index fund follows the performance of a broad range of Canadian real estate equity companies. It currently tracks the FTSE Canada All Cap Real Estate Capped 25% Index.
Smart REIT (SRU.UN-T)
A retail REIT that operates 60% in Ontario and the rest elsewhere. They have performed very well and pays a good dividend. Their biggest tenant is Walmart. They are also developping aggressively in Toronto.
REITs have had a big rally this year. Part of it is lower rates, but the other part is that they are no longer going to be under Finance, but will have their own sector. Now that we are approaching that date, he feels that some investors are taking profits, and this one may have…
Choice Properties REIT (CHP.UN-T)
A spin off company by Loblaws and the properties are leased to Loblaw stores. They have built-in future growth in the redevelopment of urban properties.
This has a lot of the real estate that Loblaws and Shoppers occupies. A great bond proxy. Versus other retail REITs, you are probably not going to get as much growth, however you are going to get pretty good stability. Loblaws owns a considerable chunk of this REIT. There is better growth in other REITs.
WPT Industrial REIT (WIR.U-T)
A REIT that focuses on building facilities, mostly warehouses, that are used in traditional and online retail as well as manufacturing. They have a US focus and pay their dividends in USD. A name that can grow with e-commerce.
(Past Top Pick Sept. 28, 2017, Up 1%) It's come off a lot lately, so he will add to his position. It's a play on Amazon, because it's an industrial REIT that stores products that Amazon sells. Pays a yield of 5.9%. He will add to an already-large position. The last quarter was weaker than…
Northwest Healthcare Property REIT (NWH.UN-T)
A trust that runs medical office buildings in Canada, Germany, Brazil and other locations. They are diversified across the world and recently announced a project in Australia. They pay 6.9% yield.
Owns this in his income portfolio. Their portfolio is diversified outside of Canada. Thinks they will continue to grow by acquisition. They pay nice yield and the CEO owns a fair bit of the stock as well.
Dream Office REIT (D.UN-T)
One of the largest Real Estate Investment Trusts in Canada. They specialize in office buildings. A lot of their operations are focused in Toronto.
Focused on the office sector, and has a large Calgary and Edmonton portfolio. Recently sold $200 million of Calgary office but still have the Edmonton exposure. Also, sold their Kitchener/Waterloo exposure. They will continue to sell assets and focus on their Class A office, especially in the Toronto area. REITs in transition are always challenging.…
Plaza Retail REIT (PLZ.UN-T)
They are developers with tenants like Shoppers Drug Mart. The trust specializes in shopping and retail in Atlantic Canada and Quebec. Analysts see a strong management team and their operations are seen to be best in class.
Has significantly outperformed its peers. He continues to be a big supporter of this. You are getting a line management, a development program and stable community-based real estate. The development they just announced in St. John’s is going to be a home run. This is one you don’t Sell.
Pure Multi-Family REIT LP (RUF.U-X)
Peter Imhof sees this REIT as a good defensive play with a good yield. A good play on the US demand on apartments that gives you some exposure to the US market. There was a take-over deal discussed recently and the company has struck a committee to facilitate a possible sale.
InterRent REIT (IIP.UN-T)
Their main holdings are apartments in Toronto, Ottawa and Montreal. There are good fundamentals for apartments and dividend increases are expected to be announced in the coming years.
Likes the apartment sector in Canada. Shorter leases and about 40% turnover so with inflation you can capture higher rates. Rock solid balance sheet and they just made a major accretive acquisition – a redevelopment play. You are buying at a discount and you will get dividend growth. They make improvements and get above guideline…
Slate Office REIT (SOT.UN-T)
They recently cut dividends to rebalance to buy property in Chicago. There are some vacancies that they are struggling to fill in Toronto. They have a sustainable payout of nearly 10%.
A REIT that has gone through a couple of transitions and is in transition now. He tries not to own companies in transition, but wants to make sure they find their way properly. Their final destination is to be a suburban office REIT in Canada. A play that is early, but has potential. They have…
Boardwalk REIT (BEI.UN-T)
A well-known REIT that operates multiple communities including Boardwalk Communities, Structures Metropolitaines, and Boardwalk Retirement Community. They were affected by the slow-down in Alberta and are refocusing on Ontario.
(Market Call Minute) There was an overreaction when oil got below $40. It will be a challenge to figure out if they will stabilize occupancy by lowering rents.
Slate Retail REIT (SRT.UN-T)
A grocery-anchored real estate investment trust in secondary markets in the U.S. midwest. A stable operation that is well-run. Managements are also large shareholders.
A Canadian listed company that has all of its assets, over 60 grocery store anchored retail malls, in the US. This gives you a better economy and a healthier consumer. They are concentrated in smaller secondary markets of about 1 million population. Going into the grocery side because there are 37,000 grocers, a lot of…
Dream Industrial REIT (DIR.UN-T)
The industrial warehouse sector in general has been experiencing high demand. DIR.UN-T is well positioned to take advantage of this trend. They are adding value and the technological move will help grow the company.
A 9% yield is high so pay attention to why it is so high. Lots of Alberta exposure. They want to reduce leverage. There are a number of issues that cause him to look elsewhere.
Dream Global REIT (DRG.UN-T)
A lot of their focus is in Europe with lots of regulations. It is one of the top performing REITs that is considered more defensive. They pay a dividend of 5.9%
(A Top Pick May 1/15. Down 2.34%.) Reduced his holdings. He likes to hold this and the Australian REIT to diversify his REIT exposure globally. This one has a lot of very good properties in Germany, and it’s all commercial. Germany is at the bottom, and this is a good place to be adding to.…
Granite REIT (GRT.UN-T)
A global real estate operator composed mainly of former holdings of Magna International. Their balance sheet is looking good and they are well-positioned. They have a low payout ratio for a REIT.
This has a huge exposure to Magna (MG-T) and their operating platforms. Not a bad REIT. The whole REIT sector in Canada has been a bid down. This company generally has had lower leverage making it somewhat attractive. Has never taken a position in the REIT sector. Would prefer Artis (AX.UN-T) or Brookfield Property Partners…
Allied Properties REIT (AP.UN-T)
A leader in the industrial space in Canadian cities. One of the highest quality Canadian REITs available. They are trading at a premium but is one of the more defensive securities.
You don’t get this one on sale very often. It has really come off. It is an opportunity to get into it. They have developments coming on line and good retail properties. This is a nice opportunity. They are continuing to diversify geographically.
Inovalis REIT (INO.UN-T)
A leading Canadian REIT stock that focus on owning and managing a portfolio of high-quality assets in Germany and France. They announced a purchase of a building in Germany recently.
This one holds only 4 assets in France and Germany. This is an opportunity to pick up some strong yield, while you are waiting for a European recovery. He sees more and more large investors, such as pension funds, going into Europe and buying up office buildings. Company is small and illiquid so it can…
Morguard North American REIT (MRG.UN-T)
A Canadian REIT stock that focus on high-quality multi-suite residential properties in Canada and the United States. They pay a dividend of 3.85%.
He favours this REIT. Doesn’t think it is going to cause anyone to jump out of their coffin. You might be fairly bored with it, but it is safe. He immensely favours Morguard (MRC-T) itself.
Agellan Commercial REIT (ACR.UN-T)
A portfolio with US properties. They also operate in Toronto. Their specialty is acquiring and owning industrial, office and retail properties.
Recent IPO that he did not participate in. He was concerned with some of the tenant concentration and, one building in particular, where there was a head lease on the building which meant that the occupancy and the rents were being guaranteed, even though they were operating at well below what the company considered normalized.…
True North Commercial REIT (TNT.UN-T)
They announced a strong start to 2019 with an acquisition of Federal government tenant office property in downtown Ottawa. They pay a dividend of 8.93%.
Has been a little weak lately. Made an acquisition of Century Property. Has a management arrangement with Starlight (?) but he would prefer a better management agreement but it is a really good source for small company acquisitions. 7.83% yield.
Melcor REIT (MR.UN-T)
They are actively buying back stocks in order to have the present value reflect the intrinsic value. A stable company that remains well-positioned to capitalize on opportunities that are presented while Alberta recovers.
Likes the company but not crazy about the REITs and their external management structure. Thought the fees were a little bit heavy so he did not participate in the IPO. Good safe company to be in but not his preferred pick.
Partners REIT (PAR.UN-T)
A Canadian REIT stock that is based in Toronto. They operate in retail and mixed-use retail community and neighbourhood centres. They pay a strong dividend of 10.47%.
Australian REIT Income Fund (HRR.UN-T)
The REIT focuses on the Australian market segment. The dividend is at 5.92%.
Australian REIT. They have not has the rise we had here in Canada. This one went through a huge reorganization that cleaned up the balance sheet but they haven’t had the move. Australia is one of the only countries that can actually lower interest rates. Pension funds are entering Australia. Their economy is tied to…
Vanguard REIT ETF (VNQ-N)
This US REIT ETF follows the general pattern across the industry. It is an extremely well diversified ETF and is one of the largest REIT funds.
Market Vectors Mortgage REIT ETF (MORT-N)
A index fund that follows closely the “Mortgage REITs Index”. They pay a dividend of 7.19%.
Generally likes mortgages. You get higher yields and there is harder collateral security. You are a step removed from the volatility of underlying real estate prices. 30% of it is in two securities, which concerns him somewhat.
Armour Residential REIT (ARR-N)
They had a disappointing first quarter but also announced that they are going to keep dividends the same. They focus primarily in fixed rate residential, residential mortgage-backed securities and U.S. Government-sponsored enterprises.
Around 14% is pretty typical yield for mortgage REITs. This owns Agency Mortgage REITs, both fixed and adjustable rates. If you look through the results of the capital raise they did recently, it was dilutive, so their book value per share was about $7 which dropped to $6.70-$6.80. He doesn’t like to see this. Core…
SPDR DJ REIT ETF (RWR-N)
RWR is one of the oldest real estate ETFs on the market. They follow the Dow Jones U.S. Select REIT Index. They pay a yield of 3.68%.