Most dividend investors chase after steady income streams and are not so concerned about price or capital appreciation. The real estate sector, particularly the special category of public companies that own and operate income-producing properties, is also an excellent source of passive income.
The so-called real estate investment trusts (REITs) trade like securities on major stock exchanges like the TSX. You gain exposure to various sub-sectors of the real estate industry without managing an actual physical property. Dividend earners love REITs because, besides the lower capital outlay, most of them pay monthly dividends.
One of Canada’s established and well-capitalized REITs is the CT REIT (TSX:CRT.UN). Canadian Tire Corporation, a strong investment-grade firm, is the REIT’s majority unit holder. The real estate stock trades at $15.98 per share (+3.88% year to date) and pays an attractive 5.47% dividend. You can generate $75.03 in passive income monthly for an investment not exceeding $16,500 (1,030 shares for $16,459.40).
Reliable, durable, and growing REIT
CT REIT has 370 income-producing, net lease retail properties across Canada. The $3.8 billion REIT relishes its longstanding, strategic relationship with Canadian Tire. Management believes the close association with the iconic retailer is a competitive differentiator.
The business growth is contractually built into CT REIT’s structure through rent escalation clauses and preferred access to the additional property required to support Canadian Tire’s ongoing business requirements.
The setup assures reliable, durable, and growing monthly cash distributions to its unitholders or shareholders. It further enables the REIT to strategically pursue opportunities to add value to its portfolio and unit price. Moreover, CT REIT can take other avenues and focus on third-party acquisitions, intensification, and development for growth.
Strong financial results
CT REIT reported strong financial results in Q4 and the full year 2022, and invested about $260 million in completed projects and ongoing developments. Its President and CEO, Kevin Salsberg, said, “Our stable and resilient net lease portfolio, which now totals over 30 million square feet of gross leasable area, along with our strong balance sheet, position us well to navigate this uncertain current market.”
Last year, property revenue and net operating income (NOI) increased by 3.5% and 4.7% to $532.8 million and $419.8 million versus 2021, respectively. As of December 31, 2022, the portfolio occupancy rate (committed) is 99.3%. Canadian Tire is the tenant in 92.3% of the total GLA and accounts for 91.4% of CT REIT’s annualized base minimum rent.
The weighted average remaining lease term with Canadian Tire is 8.9 years, and the leases with the anchor tenant contain contractual rent escalations of approximately 1.5% per year (on average).
Salsberg adds that working alongside Canadian Tire to source additional opportunities for their store and supply chain networks is ongoing. The business partners collaborate to explore options to produce incremental value at certain well-located urban assets within their collective portfolios.
Investment takeaway
CT REIT is the top-of-mind choice in the real estate sector for its long-term leases, low-risk strategy, strong governance model, and the stability of Canadian Tire’s businesses. You can accumulate more shares through dividend reinvesting if you want to increase your monthly passive income further.
