Canadian real estate investment trusts (REITs) are popular with income investors because of the monthly dividend payouts. The asset class also improves portfolio diversification, although rapidly rising interest rates adversely affect some real estate sub-sectors and smaller REITs.
However, a large-cap stock like Choice Properties (TSX:CHP.UN) is ideal for long-term investors. The $10.23 billion REIT owns and manages retail, industrial, mixed-use, and residential properties. If you invest today ($14.14 per share), you can partake in the juicy 5.33% dividend.
Assuming you purchase 1,400 shares, your $19,796 investment will generate $87.93 in monthly passive income. Increase your holdings to earn more or reinvest the dividends for faster compounding of capital. You can take comfort in Choice Properties’s dividend history. The REIT hasn’t missed a monthly cash dividend payment since 2017.
Positive momentum
The Bank of Canada raised its policy rate seven times in 2022, yet Choice Properties’s portfolio has displayed stability and strength. Management’s transformational development program proceeded as scheduled, while net income rose dramatically by 3,135% to $744.25 million versus 2021.
In the first half of 2023, net income climbed 115% year over year to $806.47 million. One of the key strategic decisions is to sell or dispose of the office properties and focus on asset classes with exceptional fundamentals. The active development projects should likewise strengthen the current portfolio.
Its president and chief executive officer (CEO) Rael L. Diamond said the year-to-date results reflect the continued demand for necessity-based retail centres and well-located industrial assets. He added that the development initiatives are essential to drive growth and grow cash flows and distributions.
Market-leading portfolio
Choice Properties is one of Canada’s largest REITs and boasts a market-leading portfolio. Leading the charge is its winning retail portfolio with predominantly necessity-based, grocery-anchored tenants. The long-standing strategic relationship with Loblaw, its anchor tenant, is a competitive advantage.
The 576 properties in the retail portfolio (82% of total revenue and 80% of net operating income) are the foundation for maintaining reliable cash flow. Choice Properties’s high-demand industrial assets are purposely built distribution facilities for large clients, including the Loblaw group of companies.
The rental residential and mixed-use properties provide additional income, including newly developed purpose-built rental buildings and residential-focused mixed-use communities. You can find these properties in Canada’s largest cities. Notably, the occupancy rates of the three strategic income-producing portfolios are 97.7%, 97.3%, and 87.9%, respectively.
A future of growth
Choice Properties has a visible future of growth. Its transformational development pipeline should increase the real estate portfolio’s gross leasable area by over 18 million square feet. The retail projects, including intensifications and greenfield projects, will expand the retail footprint and density.
Three active industrial development projects, due for completion by year-end 2023, will add more new-generation logistics space. The REIT will transform neighbourhoods into communities on mixed-use and residential properties, as part of its long-term growth strategy.
You don’t have to look far if you want exposure to Canada’s real estate sector or an alternative to buying investment properties. Choice Properties is a quality and resilient retail REIT. The industrial portfolio is growing, while the rental residential market will generate investment opportunities for further growth.
