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Need Income? 2 REITs With Yields up to 6.3%

If you need income, check out H&R Real Estate Investment Trust (TSX:HR.UN) and RioCan Real Estate Investment Trust (TSX:REI.UN), which offer above-average yields in the form of monthly distributions.


H&R REIT is the largest diversified REIT in Canada. At the end of March, it had interests in 37 office properties, 375 retail properties, 101 industrial properties, and 12 residential properties with a total of 3,832 units.

H&R REIT owns quality assets, as signified by its high occupancy rate. In the first quarter of 2017, its industrial portfolio had the highest occupancy of 99.8%, followed by 97% in its office portfolio, 92.4% in its retail portfolio, and 92.2% in its residential portfolio. This resulted in an overall occupancy of 95.5% for the quarter.

H&R REIT generates about 49% of its operating income from its office properties, 39% from its retail properties, 9% from its industrial properties, and 3% from its residential properties.

Geographically, it generates about 33% of its operating income from the U.S., 32% from Ontario, 25% from Alberta, and 10% from other Canadian provinces.

residential buildings

The diversified REIT continues its construction of 1,871 luxury residential units — a project in Long Island City, New York. It has a 50% stake in this project. The first tower is expected to begin contributing to its cash flows in early 2018.

At about $21.90 per unit, H&R REIT offers a big yield of 6.3%. The REIT’s payout ratio was 75% for the quarter, so its distribution remains sustainable.

The analyst at Bank of Nova Scotia gives a one-year target of $24.50 for the stock, which implies H&R REIT has the potential to deliver total returns of about 18%, excluding commission fees.


RioCan is Canada’s largest REIT. It has interests in 300 Canadian retail and mixed-use properties, including 15 properties under development.

It has about 6,250 tenants with each tenant contributing a small part of its cash flows, so it has little single-tenant risk. In the first quarter, its occupancy was 96.2%, which improved 1.4% compared to the first quarter of 2016.

The retail REIT has identified almost 50 properties in six major markets of Canada, on which it could expand with residential development. Over the next decade, RioCan plans to develop about 10,000 residential units — this can be a growth area for the business.

At about $25.20 per unit, RioCan offers a juicy yield of 5.6%. The REIT’s payout ratio was 80% for the quarter, so its distribution remains sustainable.

The analyst at Bank of Nova Scotia gives a one-year target of $28 for the stock, which implies RioCan has the potential to deliver total returns of about 16.7%, excluding commission fees.

Investor takeaway

H&R REIT and RioCan are great sources for sustainable, stable income. Currently, they offer yields of 5.6-6.3% with decent total returns potential for the next 12 months.

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Fool contributor Kay Ng has no position in any stocks mentioned.

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