The Motley Fool

TFSA Investors: 3 High-Yield REITs to Buy and Hold Forever

Image source: Getty Images

TFSA investors have a lot of value options in the REIT space these days. Many of the harder-hit REITs are continuing to climb out of their 2020 depths, making them worthy buys ahead of a return to normalcy.

In this piece, we’ll have a look at three of the most compelling high-yield REITs on the TSX.

Killam Apartment REIT

Killam Apartment REIT (TSX:KMP.UN) is a growth-oriented residential REIT with a portfolio of over 17,000 units — a majority of which are located in Atlantic Canada. The REIT is incredibly well run, with a growing portfolio in the province of Ontario.

The REIT recently reached an agreement to scoop up properties in the Kitchener/Waterloo region in a deal worth $190.5 million. The deal should give NOI (net operating income) a very nice boost. As such, TFSA income investors can expect a good amount of distribution hikes over time.

Fellow Fool contributor Chris MacDonald is a pretty big fan of the REIT, going as far as calling it his top TSX income play for June.

“This is one of the steadiest REITs in terms of cash flow growth in the sector.” MacDonald wrote. “I think more deals could be on the horizon for this smaller player. Currently, the company’s total portfolio is worth approximately $4 billion. More deals on the horizon could significantly boost returns for investors over time.”

MacDonald is right on the money. With a perfect blend of income (3.3% yield) and capital gains (shares up 67% over the last five years), Killam ought to be atop the radar of growth and TFSA income investors alike.

SmartCentres REIT

SmartCentres REIT (TSX:SRU.UN) is my favourite REIT on the TSX. I own shares and will continue to accumulate over time and on any weakness. Undoubtedly, SmartCentres is a contrarian play on retail real estate, specifically strip malls. Unlike most other retail REITs, Smart has held its own ridiculously well, thanks to its Walmart anchor and many essential retailers that SmartCentres housed.

With rent-collection rates near normal, I think investors should be backing up the truck on the 6.2%-yielding distribution before shares surge such that the yield compressed closer to the 5% mark.

Moreover, SmartCentres’ longer-term growth trajectory is encouraging. The REIT is diversifying into residential-retail properties, which should allow shares to be re-valued slightly to the upside. In any case, SmartCentres has some of the smartest managers running the show, and for that reason, shares should be nabbed by long-term investors who are hungry for passive income.

Canadian Apartment Properties REIT

Canadian Apartment Properties REIT (TSX:CAR.UN) is a growth REIT that I believe is a fine pick for younger TFSA investors, many of whom have shied away from the space in favour of growthy equities. You see, REITs aren’t just for retirees. CAPREIT is a great REIT that’s enjoyed far more capital appreciation than most equities out there, with 85% in capital gains posted over the past five years and a growing 2.33%-yielding distribution.

As inflation picks up, CAPREIT is one of few REITs with enough pricing power to increase rents without taking a significant hit to its occupancy rates. With properties in white-hot Vancouver and Toronto markets, CAPREIT has the freedom to jack up rents at its discretion. In such markets, it’s tough and expensive to be a renter. But for CAPREIT shareholders, it’s a great spot to be in.

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 Joey Frenette owns shares of Smart REIT. The Motley Fool owns shares of and recommends Killam Apartment REIT. The Motley Fool recommends Smart REIT.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss an important event.

Iain Butler and the Stock Advisor Canada team only publish their new “buy alerts” twice a month, and only to an exclusively small group.

This is your chance to get in early on what could prove to be very special investment advice.

Enter your email address below to get started now, and join the other thousands of Canadians who have already signed up for their chance to get the market-beating advice from Stock Advisor Canada.