These 2 Canadian REITs Are July's Top Real Estate Income Opportunities

These 2 Canadian REITs Are July’s Top Real Estate Income Opportunities

If you’re looking to boost your passive income in this economic environment, these two top Canadian REITs are some of the best you can buy.

Daniel Da Costa

Author Bio Daniel joined The Motley Fool Canada in 2019 and brings experience in banking, investing, and financial analysis. Growing up as the son of a proprietary stock trader and educator, he developed an early interest in financial markets and a passion for helping Canadians improve their financial well-being. His work spans investment research, economic analysis, and econometric modelling, with a focus on understanding the broader forces that influence businesses, markets, and the economy. As an investor, Daniel looks for high-quality businesses with long-term growth potential, reliable income, and attractive valuations. Outside of finance, Daniel enjoys spending time with his family, playing hockey, running, and sailing. Areas of Expertise Investment research, economic analysis, econometric modelling, banking, financial analysis, business fundamentals, long-term investing, dividend investing, and company valuation. Favorite Investment Quote "It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price." — Warren Buffett

Published July 25, 2023 7:15 pm EDT

As the economic environment has worsened over the last two years, and as interest rates have continued to rise rapidly, many investors are looking to boost their passive income. And one of the best industries for passive-income seekers to find high-quality investments is the real estate sector, with some of the top Canadian REITs.

Earning passive income is always compelling for investors, but it becomes even more compelling when stocks struggle to gain value, and passive income might be some of the only gains you see until the market and economy fully recover.

Furthermore, with interest rates now much higher, many stocks have significantly higher yields than they’ve had in the past.

This makes now an excellent time to boost your passive income. Plus, when you buy top Canadian REITs, not only can you expect to earn attractive passive income, but because many of these real estate stocks are highly defensive, you can have confidence owning them in this environment as well.

So, if you’re looking to boost your passive income and buy top Canadian REITs in July, here are two of the best to consider adding to your portfolio today.

A top residential REIT for Canadians to buy now

If you’re looking for top Canadian REITs to buy this July that can help boost your passive income, one of the best to consider is Morguard North American Residential REIT (TSX: MRG.UN).

Residential real estate is one of the most defensive industries there is due to the fact that everyone needs somewhere to live.

Furthermore, Morguard has done an exceptional job of helping continue to minimize that risk by diversifying its portfolio both north and south of the border. Morguard’s assets span nine different states as well as Ontario and Alberta in Canada.

However, in addition to that diversification helping to lower its risk, it also allows Morguard to have exposure to different market conditions. So, while rents have been high in Canada for a while, in the United States, they’ve been rising rapidly.

This has led to significant growth for Morguard in recent years. In fact, in just the last quarter, the top Canadian REIT reported year-over-year growth in its same-property net operating income of more than 11%.

So, not only is Morguard an ideal stock to buy for the passive income it generates, but it’s also a REIT with tonnes of growth potential, and it’s one that trades undervalued in the current environment.

Right now, the stock offers a yield of more than 4.3%, and it trades at a forward price-to-funds from operations ratio (P/FFO) of just 10 times, below its five-year average of 13.5 times, making it one of the top Canadian REITs to buy now.

An impressive REIT with a yield of 5.75%

In addition to Morguard, another top Canadian REIT to add to your portfolio if you’re looking to boost your passive income is CT REIT (TSX: CRT.UN).

Although CT REIT isn’t a residential real estate stock but a retail REIT, it may seem as though it’s not as defensive or reliable. After all, retail REITs were some of the hardest hit in the pandemic, and with many expecting discretionary spending to slow as interest rates continue to impact consumers’ budgets, many retail REITs could certainly see more volatility in the coming months.

However, CT REIT has a unique position, which is why it’s one of the top Canadian REITs to buy now. Since CT REIT’s majority owner is Canadian Tire, and since it generates roughly 90% of its revenue from Canadian Tire’s stores, it’s much more reliable than its retail stock peers.

In fact, throughout the pandemic, while many retail REITs struggled, CT REIT’s revenue and the distribution it makes to investors have continued to increase every single year.

So, now, after the stock has pulled back slightly, it’s easily one of the best you can buy. Because on top of its reliability, it has plenty of long-term growth potential. Most importantly, though, its distribution currently offers a yield of more than 5.75%.

So, if you’re looking to boost your passive income in the current economic environment, there’s no question that CT REIT is one of the top Canadian REITs to consider.