Real estate investment trusts (REITs) are among Canadians’ preferred income investments. You can buy them at the TSX and trade them like stocks. REITs are also alternatives to owning investment properties. Most REITs pay monthly dividends, which are akin to rental income.
Canada’s real estate sector, including REITs, faced challenging conditions in the last two years. Rising interest rates were a bummer in 2023 until the Bank of Canada lifted its foot on the gas pedal. But the good news now is that global REITs are poised to outperform, according to Hazelview Investments’s 2024 Global Public Real Estate Outlook Report.
Some industry analysts say REITs are comparatively cheap at the start of this year. However, if you want to capitalize on this excellent market opportunity as inflation moderates and rate cuts begin, pick the REIT that pays uninterrupted monthly dividends and will keep giving.
Dividend grower
Granite (TSX:GRT.UN), a top Canadian REIT, has been a solid performer, regardless of the economic environment. The $4.95 billion REIT owns 137 income-producing properties in Canada, the U.S., and Western Europe (Austria, Germany, and the Netherlands).
The properties are primarily industrial, such as multi-purpose buildings, logistics and distribution warehouses. Six more properties are under or for development.
Longtime Granite investors would know that the REIT is a reliable passive-income provider and a dividend grower. Granite has increased its dividends annually in the last 13 years. Moreover, the hike is usually in late December. If you invest today, the share price is $77.64, while the dividend yield is 4.28% ($3.32 annual dividend per share).
Assuming you purchase 90 shares ($6,987.60 investment), your money will generate $300 yearly or $24.92 monthly. The more you accumulate Granite shares, the more your monthly income stream grows.
Stable fundamentals
Granite’s competitive advantage is the strong market fundamentals in the industrial property sector. Besides the high demand for and institutional quality of the real estate portfolio, the REIT maintains a conservative, flexible capital structure due to lower capex requirements.
In the first three quarters of 2023, total revenue and net operating income (NOI) rose 18.6% and 17% year over year to $391.4 million and $325.2 million, respectively.
The modern characteristics of the existing property portfolio meet the demands of e-commerce and traditional distribution users. It also aligns with e-commerce trends, including transport facilities and technological advancements. Granite sees opportunities in cold storage properties (food and pharma).
Granite’s tenant base is credit-worthy companies, and Magna International is the anchor tenant. Canada’s leading auto parts manufacturer owned MI Developments before separating it from the core auto business and forming Granite REIT in 2003.
As of November 2023, Magna contributes 25% of Granite’s annualized revenue. Other tenants include Amazon and Samsung. The overall weighted average lease term is 6.4 years, while the occupancy rate is 95.6%.
Winning investment
Most REITs struggled to deliver positive returns to shareholders in 2023 because of inflationary pressures and the high-interest rate environment, but not a top-tier, resilient REIT. Granite closed the year with a 10.4% return versus the TSX’s 8.12%. This Dividend Aristocrat will not disappoint you. It will keep giving monthly dividends.
