The Motley Fool

Get High Monthly Income From These Stable REITs

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.

commercial properties

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.

Get a Top TSX Stock Pick for 2019 – for FREE

Iain Butler and his team of analysts are giving away one of their top TSX stock picks for 2019 for FREE – for a limited time.

They’ve already helped Stock Advisor Canada members outperform the market by 8X in 2018, but now they’re laser-focused on helping investors in 2019 and beyond.

Click here to discover what could be your top-performing stock for 2019

Fool contributor Kay Ng owns shares of BANK OF NOVA SCOTIA and NORTHWEST HEALTHCARE PPTYS REIT UNITS. Northwest Healthcare 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.