Real estate stocks are among the high-dividend-paying stocks long-term income investors like. Vehicles such as real estate investment trusts (REITs) mandate that a certain payout level is achieved. In other words, these trusts are designed to provide maximum income to unitholders.
For long-term income investors, this is a very good thing. Indeed, those nearing or entering retirement will want to consider holding some sort of REIT exposure in any high-income fund.
Let’s dive into two of the best options in Canada right now.
Real estate stocks: Killam Apartment REIT
Residential real estate is a great place to be, at least in the Canadian market. Occupancy rates remain high, and rents are on the rise. For REITs such as Killam Apartment (TSX:KMP.UN), these trends are very bullish.
The real estate asset class I like the most is residential. Folks need a place to live, and rent is typically the last thing folks stop paying. Even in a crisis, residential real estate tends to have some of the best low-delinquency rates among other asset classes. This is why I’d touted Killam as a great choice throughout the pandemic last year. This is also why Killam’s yield is relatively low at 3.3% at the time of writing.
In an improving economic environment with the potential for rental increases, Killam’s value increases disproportionately. Additionally, the company’s focus on Atlantic Canada is one I like from a long-term perspective. I think there’s very strong growth potential out of the Atlantic provinces that’s largely untapped. Killam is there to grow its market share and presence. To date, the company has been doing a very good job.
Killam is currently working on a number of projects, expanding its residential and mixed-use real estate portfolio. As the economy continues to improve, I think Killam REIT is a high-leverage real estate play that long-term income investors should consider.
WPT Industrial REIT
Another real estate asset class I really like for long-term investors is industrial real estate. What industrial real estate typically refers to are warehouses and distribution centers. You know, the assets that support the backbone of the e-commerce revolution.
For REITs like WPT Industrial REIT (TSX:WIR.U), this catalyst provides some significant earnings potential. The clients WPT holds as tenants are mainly blue chip in nature. Additionally, the company’s near-100% occupancy rate (even through the pandemic) indicates how essential the company’s real estate portfolio is.
WPT’s portfolio of assets are strategically located near city centres. These warehouses and distribution centres are in limited supply, giving WPT and its peer pricing power. In the REIT world, that’s a very powerful thing.
Accordingly, WPT’s yield of 4.2% seems rather high to me today. Compared to other industrial REITs, I see significant value with this pick. Those bullish on the secular trends underpinning e-commerce can’t go wrong with this name, especially at this yield. Accordingly, this is a stock on my watch list right now.
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 Chris MacDonald has no position in any stocks mentioned in this article. The Motley Fool owns shares of and recommends Killam Apartment REIT.