REIT investments are some of the best long-term options for income-seeking investors to make. This is particularly true for those investors that are focused on the real estate market but are unwilling or unable to purchase property directly. With a typical home in the GTA now going for a million dollars or more, the potential for REIT investors has never been better.
Here are two interesting REIT options to consider adding to your portfolio.
You can finally live in the city without holding four jobs
Younger Canadians, particularly millennials, often struggle with the unaffordability of property closest to Canada’s major metro areas. Those central areas are popular owing to their proximity to the entertainment, shopping, and well-paying jobs that those metro areas offer. As a result of that unaffordability, millennials are being forced to live further away in the suburbs, where housing prices are lower.
RioCan (TSX:REI.UN) is one of the largest REITs in Canada, which has, until recently, placed a focus on commercial real estate properties such as shopping mall tenants. Commercial brick-and-mortar properties have come into trouble in recent years, as the shifting preferences of consumers towards mobile commerce are reducing the need for large, expensive showroom stores. It’s a real problem for legacy retailers who are unable to adjust their business towards mobile traffic and to REITs such as RioCan that rely on the rent from those properties.
Fortunately, RioCan has a solution in place to address both that need as well as providing an answer to the needs of those millennials seeking residence near Canada’s metro areas. RioCan calls it RioCan living, which are effectively centrally located residential towers that are built on top of several floors of retail.
In short, it’s an evolution away from the brick-and-mortar commercial retail model towards a mixed-use model, which has worked well for RioCan.
In terms of results, in the most recent quarter, RioCan reported net income of $253 million, more than double the $111.4 million reported in the same quarter last year. FFO per unit diluted came in at $0.48, which was a record-setting amount for the company.
RioCan’s dividend remains one of the main reasons why investors continue to turn to the stock. RioCan currently offers a monthly distribution, which works out to an appetizing yield of 5.34%.
How about something outside the city?
While most investors are naturally drawn to investments that benefit from the traffic and financial muscle of Canada’s major metro areas, there are rewards available to investors in markets outside the big metro areas. To explore that opportunity, let’s take a moment to mention Northview Apartment REIT (TSX:NVU.UN).
Northview has taken a somewhat different approach to invest in the residential market, turning towards secondary markets around the country. Demand is still high in those markets, but prices and competition are considerably lower. That policy has worked out well for Northview, which boasts a portfolio of nearly 27,000 residential units across 60 different markets in eight provinces and two territories.
In the most recent quarter, Northview reported revenues of $97.56 million, reflecting a 9.7% jump over the same period last year. Occupancy across Northview’s portfolio came in at 93.4%, inching up 10 basis points in the quarter. FFO per diluted unit of $0.52 was $0.03 lower than the previous period.
Northview also offers a monthly distribution, which currently works out to a handsome 5.47%.
REIT investments such as RioCan and Northview can provide decades of recurring income, which remains the main reason why investors should consider these stocks. With both stocks boasting a yield of over 5% while boasting a growing portfolio of properties, there’s little reason not to buy now and hold these REITs.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.
Fool contributor Demetris Afxentiou has no position in any of the stocks mentioned.