Earn a Lifetime of Passive Income With 3 Quality REIT Stocks

There are three quality stocks in the real estate sector investors can choose for a lifetime of passive income. The RioCan stock, Summit Industrial stock, and SmartCentres stock are suited for people with long-term financial goals.

| More on:
edit Real Estate Investment Trust REIT on double exsposure business background.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn more

Investing is tough when the market is acting strangely. The bull market days are over and you need to be discerning in your choices. However, there’s one sector with resilient stocks that will allow you to earn a lifetime of passive income.

Three quality real estate investment trust (REIT) stocks are on my watch list. You can imagine the potential gains from these stocks when the economy springs back to life.

Sector’s gem

RioCan (TSX:REI.UN) is a gem. This $5.48 billion REIT is one of the largest REITs in Canada. As of year-end 2019, its total enterprise value is nearly three times higher than its current market capitalization.

Many were expecting the operations of RioCan to be severely affected by the coronavirus outbreak. The rental strike was the biggest threat to the business. However, you can’t underestimate the strength of this REIT. Its competitive advantages are showing.

RioCan has a scale and 26 years of experience in the rental business behind it. About 85% of the tenants are national, with each one possessing solid business fundamentals. More important, the rental properties’ locations are in prime, high-density markets where millions of Canadians live, shop, and work.

At less than $20 per share, RioCan is worth buying. The dividend offer is a mouth-watering 8.34% yield.

Growth potential

Summit Industrial (TSX:SMU.UN) is one-fourth the size of RioCan, but it’s just as strong and resilient. You’ll find this REIT’s Q1 2020 earnings impressive. For the quarter, net rental income increased by 39.6% versus Q1 2020. The growth stems from high stable occupancy, and rental increases.

Next up is the 37.7% increase in revenues. Cash flows should be robust in subsequent due to the 5.3 years average lease term and built-in 1.6% annual rent escalation clauses in the lease contracts. A landlord will be more than happy with the high 98.4% occupancy rate.

Rent collections in May hit 90.2%. About 5% of the tenants were allowed to defer rent payments and signed payment plans. Some 3.3% have free-rent arrangements for a limited period in exchange for lease extensions but at higher rental rates. Occupancy rates likewise jumped to 98.7%.

At less than $12 per share, this REIT will pay you a 4.73% dividend.

Value stock

I consider SmartCentres (TSX:SRU.UN) to be a value stock. This $3.92 billion REIT gets its stability from the long-standing relationship with Walmart. The American retailer and wholesaler giant is the anchor tenant in 73% of SmartCentres rental properties, and over 25% of rental income comes from them.

Aside from the lead tenant, the rest are mostly national retailers that are operating essential businesses. Some of the prominent names include Bank of MontrealBank of Nova ScotiaCanadian TireDollaramaHome DepotMcDonald’sMetroTelus, and Toronto-Dominion Bank.

If you have retailers in your portfolio that are supplying everyday groceries, pharmaceuticals, general merchandise, medical assistance, banking, telecom and other essential needs, then SmartCentres is a hands-down choice for a long-term hold.

SmartCentres remains value-focused and is far from completing its transition to become a fully diversified REIT. At less than $25 per share, you’ll get more for your money as the dividend is a whopping 8%.

True landlord

Pick any of the three REITs today to start earning and be like a true landlord.


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 Christopher Liew has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Home Depot. The Motley Fool recommends BANK OF NOVA SCOTIA, Smart REIT, and SUMMIT INDUSTRIAL INCOME REIT and recommends the following options: long January 2021 $120 calls on Home Depot and short January 2021 $210 calls on Home Depot.

More on Dividend Stocks

Dividend Stocks

Passive Income: 3 Top Canadian Stocks to Buy for Monthly Dividends

Companies such as Pembina Pipeline and Killam Apartment REIT pay investors monthly dividends, making them top bets for income-seeking investors.

Read more »

Dots over the earth connecting the world
Dividend Stocks

3 of the Top-Growing Stocks on Earth

Market volatility remains high in Q3 2022, but it’s easy to identify the top-growing stocks on Earth.

Read more »

Profit dial turned up to maximum
Dividend Stocks

1 Undervalued Canadian Dividend Stock to Buy for TFSA Passive Income and Total Returns

This cheap Canadian energy stock provides an attractive dividend yield for TFSA passive income and a shot at some big…

Read more »

money cash dividends
Dividend Stocks

Want Passive Income? 1 TSX Stock for $8/Day in Dividends

If you need cash right away, then this TSX stock can make you passive income from a stable dividend that…

Read more »

edit Balloon shaped as a heart
Dividend Stocks

My 3 Favourite TSX Dividend Stocks Right Now

Canadian dividend stocks make for great long-term buy-and-hold investments.

Read more »

value for money
Dividend Stocks

3 Incredibly Cheap Dividend Stocks to Buy for Dependable Passive Income

Now is an excellent time to load up on Canadian dividend stocks. Here are top picks that are all trading…

Read more »

A close up image of Canadian $20 Dollar bills
Dividend Stocks

3 Simple TSX Stocks to Buy With $25 Right Now

Canadians with capital of as low as $25 can purchase three simple stocks right now and earn recurring passive income…

Read more »

edit Person using calculator next to charts and graphs
Dividend Stocks

2 No-Brainer U.S. Stocks for Investors in August

Here are two undervalued U.S. stocks to diversify your investment portfolio. They both pay safe and growing dividends!

Read more »