October is only young, but it’s been a jittery month so far. On Tuesday and Wednesday of last week, the TSX fell 393 points in two days, one of its worst drops of the year. While that’s not a huge amount of data to go off of, it’s enough to have some investors worried that this October will be like the last. And in fact, there is good reason to be concerned. We are in the midst of an unprecedentedly long North American economic expansion, one that has outlasted the previous record holder by two months. In this environment, it’s natural to worry about a recession looming on the horizon.
If you’re one of those that share these concerns, then you may want to shift from a growth-oriented portfolio to one based on income. Dividends are more dependable than capital gains in bear markets, and while recession conditions can certainly result in dividends being slashed, that needn’t necessarily be the case. Last month, the Canadian Real Estate Association raised its forecast after home sales rose in August. This may indicate that real estate will perform well, despite the widely predicted coming recession. If you’re banking on continued strength in real estate, here are three REITs to consider for 2020 and beyond.
RioCan Real Estate Investment Trust (TSX:REI.UN) is Canada’s largest REIT, with over $14 billion in assets. The REIT owns a number of trophy properties in Toronto, including The Well and Yonge-Sheppard Centre. These properties typically contain big-box retail stores on the bottom and residential or office space on the top. This means the company is somewhat protected from an e-commerce-driven decline in retail sales. However, many of RioCan’s properties contain “magnet stores,” which remain popular despite the rise of e-commerce. RioCan units pay a distribution that yields 5.4% and is paid monthly.
Slate Office REIT
Slate Office REIT (TSX:SOT.UN) is a REIT that specializes in rental office space. In its most recent quarter, rental revenue rose about 4%, although net income cratered thanks to a huge rise in disposition costs. Disposition costs are those costs incurred in the final disposition of an asset; they aren’t a regular recurring cost. SOT.UN also took some criticism earlier this year for slashing its dividend. However, the REIT’s revenue growth is generally solid, and the company has a solid occupancy rate of 87.2%. This REIT is a much riskier bet than RioCan, but it has a higher dividend yield, at 6.4%.
NorthWest Healthcare Properties REIT
NorthWest Healthcare Properties REIT (TSX:NWH.UN) is a REIT that focuses on healthcare properties like hospitals and health clinics. This is a very stable niche since healthcare tenants tend to be financially secure and to remain in their physical locations for long periods of time. Northwest Healthcare has an overall occupancy rate of 95% and a whopping 98% occupancy rate in its international portfolio. These are the marks of a very stable, secure real estate company. So, it should come as no surprise that NWH.UN has risen a healthy 23% this year. This particular REIT boasts a dividend yield of 6.86% — even higher than Slate Office’s yield and probably a lot safer too.
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Fool contributor Andrew Button has no position in any of the stocks mentioned. NorthWest Healthcare is a recommendation of Stock Advisor Canada.