The Toronto Stock Exchange (TSX) has 11 primary sectors, and each sector has dividend stocks. Most dividend payers in the real estate sector are real estate investment trusts (REITs). REITs pay generous dividends but aren’t immune to market volatility.
Automotive Properties (TSX:APR.UN), RioCan (TSX:REI.UN), and Nexus Industrial (TSX:NXR.UN) are passive-income providers that can transform your investment into a $500 recurring monthly income.
Unique asset class
Allied Properties is a dividend titan, given its 7.51% dividend yield. At its share price of $10.71, 746 shares ($7,989.66) will generate $50 in passive income per month. Assuming the yield remains constant, you can accumulate up to 7,460 shares over time to produce $500 monthly.
This $525.4 million growth-oriented REIT owns and operates income-producing automotive dealership properties in Canada’s urban centres. Besides a unique real estate asset class, the country’s automotive industry has strong fundamentals. About 32 global brands are tenants, while the weighted average lease term is 10.1 years.
In the third quarter (Q3) of 2023, rental revenue and net operating income (NOI) increased 13% and 11% to $23.4 million and $19.7 million versus Q3 2023. Notably, net income soared 218.4% year over year to $28.3 million. Its chief executive officer (CEO), Milton Lamb, said the property portfolio generated growth in all key financial metrics. He credits the triple-net lease structure for the REIT’s resiliency, despite high inflation and interest rates.
Lamb added that Automotive Properties remains well positioned to generate continued same-property NOI growth, with an increasing proportion of the leases containing CPI-linked adjustments. The REIT has been paying monthly cash dividends since 2015.
Limited supply in the retail landscape
RioCan has recovered from the global pandemic, evidenced by the robust leasing velocity, high leasing spreads, and record occupancy this year. The $5.35 billion REIT is retail-focused but is increasing its mixed-used property portfolio.
In Q3 2023, retail occupancy reached a record 98.3%, while new leasing spread was 21%. NOI increased 2.9% year over year to $175.5 million, although net loss reached $73.5 million.
Nevertheless, its president and CEO, Jonathan Gitlin, said, “Our performance reflects the quality of our locations as well as the track record and cycle-tested experience of RioCan’s team.” He added the REIT benefits from the limited supply of quality space in the retail real estate. At $17.81 per share, the dividend offer is 6.06%.
Favoured asset class
Nexus acquires and owns industrial properties and continues to pursue growth opportunities in the industrial sub-sector. At $7.50 per share, this real estate stock pays a hefty 8.53% dividend. The $697.8 million REIT operates industrial (73.9%), retail (14.7%), and office properties (11.4%).
“While the real estate market faces uncertainty within a heightened interest rate environment, the industrial sector is a stable and favoured asset class. Same-store NOI continues to benefit from spreads between in-place and market rent,” said Kelly Hanczyk, CEO of Nexus.
In Q3 2023, property revenues, NOI, and net income increased 15.5%, 17.9%, and 92.1% to $39.75 million, $29.33 million, and $76.95 million versus Q3 2022. Management will continue to sell its retail and office assets. The completion of committed developments should generate outsized returns.
High yielders
Automotive Properties, RioCan, and Nexus Industrial are high-yield real estate stocks. While they are alternative passive-income sources, know and understand the inherent risks before investing.
