For many of us, $5,000 is not a big windfall that would make a meaningful contribution into a long-term savings goal. A nice vacation package, the latest tech gadget, or a down payment on a new car are some of the best uses that come to mind when those extra funds show up in our bank account.
But if you have a clear-cut goal to save and invest for your retirement, an extra $5,000 each year could make a lot of difference.
Real estate investment trusts, or REITs, provide one of the best avenues for savers who are aggressively saving for their retirement. One big reason I like REITs is that, by law, they’re required to pay out all of their earnings to investors, making them an attractive destination to earn regular monthly income.
Another benefit of investing in REITs is that they pay dividend on a monthly basis — a feature a lot of retirees would love when they have to balance their cash flows when they start relying on a passive income stream. So, with this theme in mind, here are two REITs I’d buy with $5,000.
RioCan Real Estate Investment Trust (TSX:REI.UN) runs one of the largest portfolios of retail properties in Canada, specializing in commercial real estate like malls and shopping centres. Its portfolio is comprised of 289 properties, including 17 development properties, with an aggregate net leasable area of 44 million square feet.
This REIT also has consistent history of rewarding investors with growing dividends. The company has been paying dividends for the past 23 years. During that period, RioCan raised its annual distribution 17 times.
Trading at $24 a share at the time of writing, RioCan now yields 6%. That yield looks too juicy to ignore when other investments aren’t even paying half of that rate.
Canadian Apartment Properties
If you want to divide your investment dollars between high-growth and high-dividend stocks, then you can consider Canadian Apartment Properties REIT (TSX:CAR.UN), which has delivered 69% in total returns during the past five years. This REIT manages multi-unit residential properties, including apartment buildings, townhouses, and land lease communities located near major urban centres across Canada.
This focus has paid off, as demand for rental units in Toronto and other major cities remains strong, helping Canadian Apartment REIT to outperform other REITs at a time when their share prices are under pressure due to rising interest rates in Canada.
Over the past 12 months, Canadian Apartment REIT’s shares have soared 19% when compared to 4% gains in iShares S&P/TSX Capped REIT Index ETF. Trading at $40.48, and with an annual dividend yield of 3.32%, the REIT pays a $0.11-a-share monthly dividend, which has grown over 3% annually during the past five years.