It’s no secret I’m not a big fan of normal Canadians buying a rental property or three. I just don’t think it’s a very wise investment for the average person.
Think about all the extra work you’ll create for yourself if you become a landlord. You’ll have to wade through a mountain of rental applications, show the property to prospective tenants that might not even show up, collect the rent, make sure the place isn’t destroyed, and then do up the books at the end of the year. And that’s not even mentioning every landlord’s deepest fear: the dreaded 3:00 AM maintenance call.
There’s a better way. An investment in Canada’s top real estate investment trusts (REITs) offers you instant diversification across both cities and asset classes, exposure to top real estate managers, less risk, and, perhaps most importantly, an investment in a REIT is totally hands off. All you do is sit back, relax, and collect your dividends.
Does that sound good? Of course it does!
Let’s take a closer look at three top REITs you’ll want to own over the long term — excellent companies that pay some of the best dividends out there. One even yields more than 8%.
By being Walmart’s landlord of choice in Canada, SmartCentres REIT (TSX:SRU.UN) has amassed a retail real estate empire that is fueling growth into other parts of the market. It’s an excellent long-term strategy.
Approximately 25% of SmartCentres’s rent comes from the world’s largest retailer, which isn’t such a bad thing. These Walmart-anchored developments attract plenty of foot traffic, which then makes the whole development more enticing for other retailers.
Earnings from these now mature developments are fueling the next stage of the company’s growth. Planned development projects include mixed-use office and retail space across southern Ontario and the Montreal markets. The company is also expanding into things like self-storage and seniors housing through partnerships with more established operators.
Meanwhile, investors get paid an attractive $1.85 per share annual dividend — a payout that was just raised by 2.8%. That works out to a solid 5.8% yield, a great payout compared to similar REITs.
Northwest Healthcare Properties REIT
Northwest Healthcare Properties REIT (TSX:NWH.UN) checks off two diversification boxes that regular investors just can’t do on their own. The company owns healthcare-related property around the world, with assets in Canada, Brazil, The Netherlands, Germany, Australia, and New Zealand.
As the world’s population continues to age and we live longer, these assets are shaping up to be a great investment. And Northwest is especially poised to grow its asset base because it has expertise in multiple nations. Recent growth initiatives include buying a new hospital in Brazil and acquiring seniors living property in Australia.
The company could easily expand into the United States, too, which would further add to its almost limitless growth potential.
Shares aren’t exactly cheap today, bumping up against a fresh new 52-week high. But the valuation is still reasonable and, perhaps most importantly for patient investors, shares pay a robust 6.5% dividend.
True North Commercial REIT (TSX:TNT.UN) offers one of the best yields in the entire REIT sector. It yields a very attractive 8.3%.
The company’s portfolio currently consists of 45 properties spanning some 3.6 million square feet in British Columbia, Alberta, Ontario, New Brunswick, and Nova Scotia. The majority of the portfolio — which focuses on leasing office space to government and high-quality corporate tenants — is located in Ontario.
True North has been a strong growth story over the last few years, with that trend is expected to continue. The company will close on three new buildings sometime soon that will add more than 600,000 square feet to its portfolio. These buildings are fully occupied with nearly 100% of rent coming from government or high-quality corporate tenants.
Investors don’t have to worry about the big yield, either. The payout is approximately 100% of funds from operations, but the trust’s dividend-reinvestment plan and the new acquisitions are easily enough to ensure the dividend can be maintained.
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Fool contributor Nelson Smith owns shares of Smart REIT and NORTHWEST HEALTHCARE PPTYS REIT UNITS. The Motley Fool recommends NORTHWEST HEALTHCARE PPTYS REIT UNITS.