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Income Investors: 5 Top REITs Yielding Up to 7.7%

It’s one of the best income sources around: owning a rental property.

Every month, you receive a rent cheque. Each year, your property values go up a little. No wonder some people retire on the income earned from their real estate.

But for most of us, becoming a landlord is kind of a hassle. Mowing lawns. Fixing leaky faucets. Repairing clogged toilets. Imagine spending your golden years chasing down rent cheques from tenants. No thanks!

That’s why you might want to learn about a way to collect monthly rental income without becoming a landlord. I’m talking about becoming a partner with already established property owners through real estate investment trusts, or REITs.

As regular readers know, REITs are one of my favourite income investments. They own properties, collect rent cheques, and pass on the profits to investors. The best part, a professional management team handles all of the daily operations, so you never have to deal with tenants.

And it gets better. Thanks to a special loophole, REITs pay NO corporate income taxes. But in exchange for this benefit, these firms are required by law to pass on all of their profits to investors. That’s why you often see REITs with yields as high as 5%, 7%, and even 10%!

Needless to say, that’s a lot better than the puny payouts you’ll ever earn on a bond today. This is why thousands of ordinary Canadians use them to collect monthly rental income without stepping foot on a single property. So to help get you started, here are five of my favourite REITs to investigate further.


Current Yield

Market Cap

Boardwalk REIT 3.3% $2.90 billion
Canadian Apartment Properties REIT 4.0% $3.47 billion
RioCan REIT 4.7% $9.44 billion
H&R REIT 5.8% $6.39 billion
Dream Global REIT 7.7% $1.16 billion

Source: Yahoo! Finance

Let’s say a few words about these trusts.

Boardwalk REIT (TSX:BEI.UN) and Canadian Apartment Properties REIT (TSX:CAR.UN) own a recession-proof niche in the real estate market. Their property portfolios consist of student housing, apartment buildings, and manufactured homes. Simple. Stable. Lucrative. Tenants pay their rent. You get paid.

Sure, it’s nothing fancy. However, people always need to put a roof over their heads. That’s why these properties will continue to generate respectable income no matter what the economy is doing.

The story is straightforward at RioCan Real Estate Investment Trust (TSX:REI.UN). This blue-chip firm owns malls and shopping centers across the country, earning a profit by leasing space to retailers and skimming a percentage of their sales. As a result, its fortunes tend to be tied to consumer spending.

Dream Global REIT (TSX:DRG.UN) is another corporate trust which owns hundreds of Grade A office properties across Germany. Needless to say, these office tenants tend to have a lot more ‘rent money’ than the friendly folks answering a ‘Nice 2-bedroom’ ad on the internet. No wonder Dream Global has one of the highest payouts around, with a current yield coming in at 7.7%.

Finally, we have H&R Real Estate Investment Trust (TSX:HR.UN). This firm owns a hodgepodge of retail, office, and industrial properties, so it can’t be fitted neatly into one category. However, if you only have room for one REIT in your portfolio, H&R provides the most diversification in one investment.

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Fool contributor Robert Baillieul has no position in any stocks mentioned.

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