Investors focused on dividend-paying stocks to earn regular passive income must be aware of REITs, or real estate investment trusts. While REITs are popular for their high payout ratios, they also offer decent capital gains over time.
Investors should note that the share prices of several REITs have declined over the past year due to increased interest rates and macro uncertainty. However, the fundamentals of these companies remain strong, implying investors can benefit from the recovery in their prices, as the interest rate environment normalizes and they reduce debt.
With this background, here are four REITs worth investing in for stellar passive income and capital growth.
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Canadian Apartment Properties REIT
Canadian Apartment Properties REIT (TSX:CAR.UN), popularly known as CAPREIT, is a growth-oriented REIT providing quality rental housing. It owns about 66,000 residential sites in well-located areas in Canada and the Netherlands. CAPREIT benefits from its consistently solid occupancies and rising average monthly rents.
Growing population, lack of housing supply lowering affordability of homes, and the presence of its residential suites in the five most unaffordable cities continue to drive demand and support its growth. CAPREIT stock has risen over 18% this year and pays a monthly dividend that continues to grow with time. It offers a yield of approximately 2.91% (based on its closing price on June 15).
Dream Industrial REIT
Dream Industrial REIT (TSX:DIR.UN) is another solid option to consider. It focuses on industrial assets across key markets in Canada and Europe. It benefits from a significantly higher occupancy level of nearly 99%. Further, continued growth in market rents, contractual arrangements with rent steps and indexation augur well for growth.
Looking ahead, robust leasing momentum at attractive rental spreads, a solid developmental pipeline, and accretive acquisitions will likely support its growth. Dream Industrial also pays a monthly dividend and offers a high yield of over 5%.
SmartCentres Real Estate Investment Trust
SmartCentres REIT (TSX:SRU.UN), with its extensive network of income-producing retail and office space, is a compelling investment in the REITs space. Its assets are strategically located, which drives its occupancy (which stood at 98% at the end of the most recent quarter), adding stability to its portfolio. Meanwhile, its high-quality tenant base of top retailers is positive.
It’s worth highlighting that SmartCentres REIT generates most of its rents from creditworthy counterparties, including essential service providers. Further, most of its debt is fixed rate, making it less susceptible to a higher interest rate environment. It has delivered an average annual return of 13% since its IPO and offers a high yield of 7.36%, making it an attractive investment.
NorthWest Healthcare Properties REIT
NorthWest Healthcare (TSX:NWH.UN) is an attractive investment near the current levels. Its stock price witnessed a decline due to higher interest rates and high debt. However, the REIT is reducing debt and interest rates, which augurs well for future growth and supports its cash flows.
Its diversified and defensive portfolio of healthcare-focused real estate, high-quality tenant base, long lease expiry term, and rent indexation provide stability and growth. Like its peers, NorthWest pays monthly dividend and offers a high yield of more than 10%.
