The Top Canadian REITs to Buy in October 2023

Canadian REITs can be a great contributor to any income portfolio, but these three are my top choices in October 2023.

Amy Legate-Wolfe

Author Bio Amy became interested in investing in 2018 after having her first daughter. After receiving a masters degree in journalism from Western University, she became frustrated that the finance industry remained a confusing place for Canadians like her: new parents, millennials, and other young people who needed to understand their finances. Now, Amy focuses on tech companies and renewable energy for growth opportunities, coupling that with long-term investing strategies and equities. She also provides investors with a daily newsletter, Canada Stock Digest, for daily market updates. Her work can also be found at Canada's National Observer, where she writes on the business side of climate action. Before joining Motley Fool Canada, Amy wrote for major news organizations including HuffPost, CTVNews.ca, and CBC. When she’s not researching investing strategies, Amy’s time is pretty much monopolized by her two wild daughters, but in what little spare time she has she loves to do yoga, go on walks with her dog, and travel with her husband. Social Media Follow Amy on LinkedIn and Canada Stock Digest. Favorite Investment Quote “October: This is one of the particularly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February.” – Mark Twain

Published October 19, 2023 8:15 pm EDT

Real Estate Investment Trusts (REITs) have long been a staple for investors seeking a combination of income and growth potential. In the Canadian market, REITs Canadian Apartment REIT (TSX: CAR.UN), Granite REIT (TSX: GRT.UN), and Slate Grocery REIT (TSX: SGR.UN) stand out as compelling options for investors looking to add diversity and stability to their portfolios.

CAPREIT

Canadian Apartment REIT, or CAPREIT, has demonstrated its resilience and growth potential in recent years. With a dividend yield of 3.21%, it appeals to income-oriented investors. Moreover, the shares of CAR.UN have surged by an impressive 9% in the last year, underlining its capital appreciation potential.

Mark Kenney, the President and Chief Executive Officer of CAPREIT, emphasizes the company’s strong operational performance. Their Q2 2023 report highlights a near 99% occupancy rate in the Canadian residential portfolio, showcasing stability in the rental market. Additionally, the company’s focus on strategic asset management is commendable. CAR.UN has sold non-strategic buildings worth $293 million, reinvesting $208 million of net proceeds into new rental properties in thriving Canadian regions, representing 10% of the Canadian portfolio value. This strategic shift is expected to drive future growth.

Stephen Co, Chief Financial Officer, elaborates on the execution of the CAPREIT 2.0 strategy, emphasizing the allocation of $101 million to the NCIB program. This move demonstrates the company’s commitment to creating value for unitholders. Additionally, securing $368 million in mortgage refinancings at a weighted average interest rate of 4.1% and an increase in diluted funds from operations (FFO) per unit by 1.2% further strengthens the investment case for CAR.UN. The company’s ample liquidity and strong capital recycling program are essential components of its strategic priorities.

Granite REIT

Granite REIT, with a dividend yield of 4.49% and a 6.3% increase in share value over the last year, is another attractive option for investors. The company’s financial performance highlights its potential for both income and growth.

Notably, Granite’s net operating income (NOI) increased to $108.6 million in Q2 2023, primarily due to net acquisition activity and developments initiated in the previous year. The same property NOI on a cash basis increased by 7.7%, excluding foreign exchange impact, showcasing steady growth. Funds from operations (FFO) and adjusted funds from operations (AFFO) have also increased, further solidifying its income potential.

Despite challenges, including fair value losses on investment properties and currency fluctuations, Granite’s net income improved significantly. The company’s ability to adapt and generate income in a changing market is commendable.

Slate Grocery REIT

Slate Grocery REIT, with a generous dividend yield of 10.91%, may appear as the outlier among the three, with shares down 23% in the last year. However, its performance in other areas merits attention.

Slate Grocery REIT achieved record leasing activity in the last quarter, driving occupancy and revenue growth. New leases completed well above comparable average rents indicate its income potential. The REIT’s focus on improving same-property NOI and reducing the AFFO payout ratio, even in a rising interest rate environment, signifies strong financial management.

Furthermore, SGR.UN has strengthened its balance sheet, increasing liquidity and financial flexibility. The REIT has no debt maturities in 2023, which provides stability in uncertain times. The focus on underwriting attractive buying opportunities and potential for rental growth offers long-term growth prospects.

Bottom line

These three Canadian REITs offer a range of benefits for investors. CAR.UN provides stability and growth in the residential rental market, while GRT.UN combines income and growth potential in the real estate sector. SGR.UN, with its high yield and strategic initiatives, presents a compelling option for income-focused investors. Each of these REITs comes with its own unique strengths, making them some of the best REITs to consider for your investment portfolio. However, as with any investment, it’s crucial to conduct thorough research and consider your financial goals before making a decision.