Why This Canadian REIT Is a Top Value Pick

This top Canadian REIT is highly reliable, has an impressive dividend yield, and, if you buy in this environment, offers a tonne of value.

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There’s no question that over the last year, some of the best value picks for Canadian investors have been high-quality real estate investment trusts (REITs).

Many real estate assets have seen their values fall as interest rates rise and impact these companies, especially with rising financing costs.

However, while higher interest rates are certainly an impactful factor on real estate businesses, the industry itself is also highly defensive and one of the best to invest in for the long haul.

Therefore, in the near term, as valuations have fallen, many Canadian REITs are some of the top value picks on the market, making today’s environment an opportune time to increase your exposure to the real estate sector.

Often when investors think of real estate, though, the residential industry is one that comes first to mind. And while that makes sense since residential real estate is highly defensive and has shown impressive growth potential over the years, there are plenty of other high-quality Canadian REITs to buy now that offer incredible value, such as CT REIT (TSX:CRT.UN).

So, if you have some cash to invest and are looking to get the most bang for your buck, here’s why CT REIT is one of the best real estate investments you can make today.

CT REIT is a highly defensive investment

Although retail REITs aren’t typically as defensive as residential REITs, and although many retail REITs have struggled in the new environment since the pandemic, where e-commerce popularity has exploded, CT REIT continues to be one of the most reliable retail REITs thanks to its parent company, Canadian Tire.

Canadian Tire is both the majority owner of CT REIT and its largest tenant, accounting for roughly 90% of the REITs revenue.

So, unless one of the best and most well-known retail companies in Canada runs into serious problems, CT REIT should continue to remain robust and highly reliable, regardless of the economic environment.

In fact, it’s one of the few Canadian REITs on the Canadian Dividend Aristocrats list, with 10 consecutive years of increasing its distribution, an impressive record, especially for a retail REIT.

It’s also worth noting that since it went public, CT REIT has never had a single quarter where its revenue didn’t grow year over year, including through the pandemic. This just goes to show exactly how reliable the Canadian REIT is and how much value it can offer your portfolio.

Furthermore, in addition to its reliance on Canadian Tire, it also has plenty of impressive growth projects in development that should continue to help Canadian Tire to expand its operations and ultimately continue to return more capital to investors each year.

CT REIT offers Canadian investors tonnes of value today

Although CT REIT may not trade that cheaply, currently just over 10% off its high, it’s important to remember that CT REIT is extremely reliable and not typically very volatile. So, although a 10% discount isn’t a tonne of value, you’re also buying a stock that can protect your capital exceptionally well.

Furthermore, with the REIT selling off over the last year and after its recent increase in its distribution, the top Canadian value stock now offers investors a forward yield of more than 5.7%.

It’s also worth pointing out that its current price to adjust funds from operations (P/AFFO) ratio is currently just over 13 times. Meanwhile, its historical average P/AFFO ratio is roughly 15 times.

Therefore, while you can buy this low-volatility and highly reliable Canadian REIT while it offers attractive value, it’s certainly one of the top investments to consider adding to your portfolio while you can still buy it cheaply.

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 Daniel Da Costa has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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