Retirees: 2 Must-Buy REITs That Tanked Over 6% on Thursday

Boardwalk REIT (TSX:BEI.UN) is just one of many Canadian real estate plays that took a massive hit to the chin on Thursday.

| More on:

Image source: Getty Images

Canadian REITs (real estate investment trusts) got walloped on Thursday, with your average play falling nearly 5%. That’s a severe decline, especially for an asset class that’s supposed to be less correlated to the broader equity markets.

For many retirees and conservative investors, the REIT plunge was devastating. However, for those with enough cash to take advantage of the lower prices and higher yields, I would not hesitate to start doing some buying right here, even as markets grow more unsettled over high inflation (8.6% in the United States) and the latest round of rate hikes (a massive 75 bps — the largest hike in decades).

It’s an ugly situation to be in for investors, with the last places to hide (from REITs to Bitcoin and even energy stocks) crumbling like a paper bag. While it’s tempting to do some selling, I’d urge investors to take a longer-term approach. At the end of the day, long-term investors will arise from the rubble, perhaps with a few bargains in hand for those willing to hold their nose.

After such a big down day for the REITs, I’d encourage those who don’t buy the recession fears to do a little buying. In this piece, we’ll have a closer look at two high-yielding plays in the REIT space that I would not hesitate to pick up while there’s still fear in the air on Bay Street.

Boardwalk REIT: Down 7% in a day

Boardwalk REIT (TSX:BEI.UN) fell just north of 7% on Thursday in the REIT bloodbath. The $2 billion residential REIT, which specializes in apartment buildings across various provinces, now finds itself down around 32% from its all-time highs just north of $60 per share.

Undoubtedly, higher rates and recession risks are not good news for a REIT that has a considerable sum of debt on the balance sheet. Inflation could also continue to weigh heavily. Still, it’s respectable that margins have held up thus far. Indeed, it was a nasty day for all REITs, and though shares are back on the descent, the recent occupancy rates don’t act as a screaming sell signal — at least not yet.

In the face of recession, Boardwalk may have to take a step back before it can move forward again. Still, I’d argue there are reasons to give the ailing, growthy REIT the benefit of the doubt. The yield is meagre at 2.6%. However, the 3.9 times trailing earnings multiple screams value for those seeking big total returns.

H&R REIT: Down 6% in a day

H&R REIT (TSX:HR.UN) is another great REIT that probably fell a lot more than it should have in a gloomy day on Wall and Bay Street. Indeed, it’s easy to imagine that many investors are still upset over the distribution cut made nearly two years ago. Recent spin-offs and non-core asset sales have also come at a suspect time. Undoubtedly, H&R may have gotten a better bang for its buck had it gone through with such sales before the pandemic.

In any case, H&R seems to have lost its way, with shares down 27% over the past year. Amid the decline, shares have become one of the cheapest real estate plays out there at less than 2.5 times earnings. H&R may be under pressure, but does it deserve a round-trip ticket back to those single-digit 2020 lows? Probably not.

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 has positions in and recommends Bitcoin.

More on Investing

consider the options

Better Buy in September 2023: Battery Stocks or EV Stocks?

Battery stocks and EV stocks belong to fast-growing spaces, but I’m more excited about Lithium Americas Corp. (TSX:LAC) today.

Read more »

stock data
Dividend Stocks

3 Stocks I’d Load Up on When They’re Down

These three stocks have outperformed the market greatly in the long run. They're good considerations for purchases when they are…

Read more »

Businessman holding AI cloud
Dividend Stocks

AI Stocks Are Totally Overheated: Here’s What to Buy Instead

Passive-income stocks like Suncor Energy Inc (TSX:SU) can pay you large dividends in retirement.

Read more »

analyze data

2 Undervalued Stocks to Invest in This Month

Pick up Amazon (NASDAQ:AMZN) and another top stock going into October 2023.

Read more »

Target. Stand out from the crowd
Stocks for Beginners

This Undervalued Stock Is a Top Choice in 2023

This undervalued stock checks all the boxes, providing investors with a superb opportunity for long-term growth.

Read more »

Stocks for Beginners

5 Stocks You Can Confidently Invest $500 in Right Now

Are you interested in investing $500 right now? Here are five stocks to choose from!

Read more »

Tech Stocks

3 Top Tech Stocks That Could Help Make You Rich by Retirement

Are you looking for tech stocks that could help make you rich by retirement? Here are three top picks!

Read more »

A close up image of Canadian $20 Dollar bills

TFSA Passive Income: 4 Stocks to Buy and Never Sell

These top TSX dividend stocks look cheap right now.

Read more »