The Motley Fool

Get +8% Yields From These 2 REITs

If you’re looking for income, you wouldn’t want to miss out on safe, high-yield real estate investment trust (REIT) opportunities.

Specifically, I would like to bring your attention to Northview Apartment REIT (TSX:NVU.UN) and NorthWest Health Prop Real Est Inv Trust (TSX:NWH.UN), which yield north of 8%.

They earn rental income from their diversified portfolio of real estate properties.

Northview Apartment

Northview Apartment is the combined company of Northern Property REIT and True North Apartment REIT. The transaction occurred in 2015, making Northview Apartment the third-largest publicly traded multi-family REIT in Canada.

Northview Apartment has more than 24,000 residential suites in over 60 markets across eight provinces and two territories.

Its apartments, townhomes, and single-family apartment buildings make up the bulk of its portfolio, generating about 86% of its net operating income (NOI). On top of that, the company also owns and manages execusuites, hotels, and commercial properties.


Northview Apartment targets a long-term annual funds from operations (FFO) payout ratio of about 70%. Its latest payout ratio was 71%. So, the REIT maintains a conservative payout ratio, which can sustain its nearly 8.1% yield.

The market demands a higher yield from Northview Apartment because of its exposure to resource-based markets, which contribute about 22% of its NOI.

The company also earns about 27% of its NOI from Ontario, which is viewed as more stable. Moreover, its portfolio occupancy is about 90%.

Investors should note that since 2002, Northview Apartment has reduced its payout ratio from over 90%. As well, it has hiked its distribution eight times in that period.

NorthWest Healthcare Properties

NorthWest Healthcare has an international portfolio with interests in 136 healthcare properties across 9.2 million square feet of gross leasable area.

From its latest presentation in November, NorthWest Healthcare reveals that it earns 44% of its NOI from Canada, 29% from Brazil, 20% from Australasia, and 7% from Germany. And it earns 46% of its NOI from hospitals and 54% from medical office buildings and other asset types.

NorthWest Healthcare is underpinned by long-term leases with a weighted average lease term of 11 years, a high normalized portfolio occupancy of 96%, and a sustainable adjusted FFO payout ratio of 87%.

The quality units yield north of 8% at less than $10 per unit.

The takeaway

Both Northview Apartment and NorthWest Healthcare offer safe yields north of 8%. Income investors would be thrilled to know that REIT distributions can be more favourably taxed than their job’s income.

Here’s how it works.

REITs pay out distributions that are like dividends but taxed differently. In non-registered accounts, the return of capital portion of the distribution is tax deferred until unitholders sell or their adjusted cost basis turns negative.

REIT distributions can also contain other income, capital gains, and foreign non-business income. Other income and foreign non-business income are taxed at your marginal tax rate, while capital gains are taxed at half your marginal tax rate.

Looking for a few great dividend-paying stocks to buy today?

If so, you’re in luck! Because we just tapped one of our top analysts -- and experts in this field -- and asked him to put together a special report highlighting three of his favorite dividend-payers to buy right now.

These three “Cash Kings” have an average yield of 4.0%... are poised to profit from three diverse (and highly crucial) sectors of the economy… and look like they have the ability to grow their dividend well into the future.

For a limited time you can get a copy of this brand new special report free of charge by simply clicking here.

Fool contributor Kay Ng owns shares of Northview Apartment REIT and NORTHWEST HEALTHCARE PPTYS REIT UNITS.  NorthWest Health Prop Real Est Inv Trust is a recommendation of Stock Advisor Canada.

I consent to receiving information from The Motley Fool via email, direct mail, and occasional special offer phone calls. I understand I can unsubscribe from these updates at any time. Please read the Privacy Statement and Terms of Service for more information.