2 High-Yield REITs to Fight Back Against 6.7% Inflation

BMO Canadian Equal Weight REITS Index ETF (TSX:ZRE) and another high-yield REIT can help Canadians ease the pain of 6.7% inflation.

| More on:
Pixelated acronym REIT made from cubes, mosaic pattern

Image source: Getty Images

Canadian REITs have been stalling out in recent months, but many are still worth loading up on for Canadians seeking shelter from all the inflation out there. The market volatility has also grown out of control, with the S&P 500 down nearly 13% from its high. It’s been a bloodbath, with the tech-heavy Nasdaq 100 down around 22%.

Fortunately, Canadian investors don’t need to embrace the choppiness if they can’t stomach the churn. The REIT space is often neglected, but it’s one of the most intriguing places to be, as inflation continues weighing heavily on the global economy.

Inflation is here: Don’t count on central banks to have your back!

Though coming interest rates hikes aren’t good for the REITs, I think that the dovish tone of the Bank of Canada (BoC) bodes well for them. With Canada’s CPI numbers running hot, recently hitting 6.7%, it’s alarming that the BoC has only delivered a modest hike so far this year. Undoubtedly, pundits may call for a full-point hike in May 2022. It would be needed to calm inflation down, but given the BoC’s willingness to let inflation take off, it seems as though investors had better prepare for more of the same: inflation that could last through 2024.

Undoubtedly, inflation may be nearing a peak in the 6-8% range. But that’s still alarmingly high. Today, you’d need a nearly 7% dividend yield just to stay ahead of inflation. That’s simply unrealistic in the equity markets. Fortunately, there are high-yield Canadian REITs out there that can help you preserve your wealth, as inflation continues to bring harm to your nest egg.

Consider Inovalis REIT (TSX:INO.UN) and BMO Canadian Equal Weight REITS Index ETF (TSX:ZRE), which currently yield 9.9% and 4.1%, respectively.

Inovalis REIT

Inovalis REIT sports a nearly 10% yield. Though Inovalis is a REIT that’s riskier than many of its lower-yielding peers, it’s not nearly as risky as you’d think, given the security normally commands a yield in the 7-8% range.

Undoubtedly, the yield is a tad on the high side, and as an office REIT, the COVID headwinds are apparent. After climbing back so far from the abyss of 2020, shares of the European-focused office REIT have begun to sag again, recently falling to $8 and change per share. Shares are now off around 20% from its 52-week high due to a wide range of factors.

The rise of remote work is a concern, as too are new variants of COVID. Still, I think those who remain bullish on a return to the office can do well collecting the juicy payout.

On its own, Inovalis is a riskier play. So, it makes sense to balance it out with a broader basket of REITs. Enter ZRE.


ZRE is an equal-weight mix of Canadian REITs spanning a range of real estate sub-industries from industrial, office, retail, and residential. For those seeking diversification and payout stability, ZRE is a one-stop shop that’s more than worth its 0.61% management expense ratio.

ZRE makes it so simple to gain exposure to a wide range of Canadian real estate. Though the 4% yield will not help you outpace today’s levels of inflation, it could help dampen the blow. Further, should the BoC begin to take inflation seriously, a 3-4% target could be reached in early 2024. Such a scenario would allow the ZRE’s distribution to start allowing you to make a real return again.

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 has no position in any of the stocks mentioned. The Motley Fool recommends Inovalis REIT.

More on Investing

analyze data
Dividend Stocks

The Best Dividend Stocks in Canada Right Now

Earn worry-free income from these best Canadian dividend stocks.

Read more »

Value for money
Dividend Stocks

3 Top Canadian Value Stocks in December 2023

Not all undervalued stocks are worth buying. You should look into the fundamental strengths of the stocks and reconcile value…

Read more »

calculate and analyze stock

2 TSX Stocks to Dominate the Market in 2024

Two stocks with market-beating returns with one month to go this year are the frontrunners to dominate the market in…

Read more »

Young woman sat at laptop by a window

SPY Stock Is Just the Tip of the Iceberg for Canadians Investing in the U.S.

These two BMO ETFs are great alternatives to just buying SPY.

Read more »

TFSA and coins
Stocks for Beginners

How a BIG New TFSA Change Could Affect You in 2024

Canadians are in for a BIG surprise for the TFSA in 2024. Here's how TFSA changes could help you keep…

Read more »

Growing plant shoots on coins
Dividend Stocks

2 Under-the-Radar Dividend Payers With Solid Growth Prospects in 2024

These under the radar monthly dividend payers could provide good growth prospects in 2024 and beyond.

Read more »

Bank Stocks

3 Reasons I’m Buying Royal Bank Stock Today

Royal Bank (TSX:RY) stock has shown signs of strength and yet still put aside $720 million in provisions for loan…

Read more »

Business success with growing, rising charts and businessman in background
Tech Stocks

Growth Stocks: A Once-in-a-Lifetime Opportunity to Get Rich

Here's why investing in quality growth stocks such as Docebo and Datadog may allow you to generate sizeable returns.

Read more »