Real estate is a great place to invest in for monthly income. While most safe dividend stocks offer yields of 3-4%, certain real estate investment trusts (REITs) offer more compelling yields.
Income investors should consider defensive REITs such as Choice Properties (TSX: CHP.UN) and NorthWest Healthcare Properties (TSX:NWH.UN) for high monthly income. They offer safe yields of 6-8%.
Choice Properties REIT
In May, Choice Properties combined with Canadian REIT and formed Canada’s largest REIT. As you may recall, Canadian REIT was a very well managed diversified REIT with office, retail, and industrial assets and the longest streak of dividend growth for a Canadian REIT.
The former CEO, COO, and CFO of Canadian REIT Stephen E. Johnson, Rael L. Diamond, and Mario Barrafato, respectively, have now become the CEO, COO, and CFO of Choice Properties. So, shareholders can be reassured that Choice Properties is in good hands.
Choice Properties’ original portfolio has Loblaw as a primary tenant and has a high occupancy of about 99% and a long weighted average remaining term of about 10 years.
At $12.22 per unit as of writing, Choice Properties offers a yield of about 6% with a recent funds from operations (FFO) payout ratio of about 71% and a sustainable adjusted FFO payout ratio of about 83%.
Bank of Nova Scotia has a one-year target of $13.25 per unit, representing 8.4% near-term upside potential and more than 14% near-term total returns potential.
NorthWest Healthcare Properties
NorthWest Healthcare Properties has about 153 healthcare properties in its portfolio, which is composed of medical office buildings and hospitals. It’s in a solid asset class and maintains a high occupancy of about 96%.
The REIT’s international reach is certainly an advantage, as it offers a wider range of acquisition opportunities. For example, NorthWest Healthcare Properties collects rental income from eight hospitals in Brazil, whose primary tenant is the country’s largest private hospital operator Rede D’Or.
These hospitals have 100% occupancy rates and long lease terms of about 20 years with rental increases that are 100% indexed to inflation. So, they’re very stable and offer strong growth. The REIT is also invested in Canada, Germany, Australia, and New Zealand.
At $10.28 per unit as of writing, NorthWest Healthcare Properties offers a yield of about 7.8% with a recent payout ratio of about 90%. Bank of Nova Scotia has a one-year target of $11.85 per unit, which implies there’s more than 15% near-term upside potential and about 23% near-term total returns potential.
Investor takeaway
If you need a boost in income, consider buying Choice Properties and NorthWest Healthcare Properties, as their stocks have dipped in the last year and their effective yields have thus been pushed up.
