The Top Canadian REITs to Buy in February 2024

My top Canadian REITS, yielding 5% and 7%, both benefit from one of the most lucrative secular trends, the aging population.

Karen Thomas, MSc, CFA

Karen is a stock market enthusiast focused on uncovering those stocks that she believes the market has mispriced. She does this through fundamental and quantitative analysis of companies and their industries, as well as a study of future opportunities and trends. She holds a Masters degree in Finance, the CFA designation, and has over 20 years of experience in the investment management industry. Having worked at a major pension fund, as well as two leading mutual fund firms as an analyst and portfolio manager, she has solid investing expertise which she aims to share with her readers.

Published January 31, 2024 4:20 pm EST

Canadian REITs still have a lot going for them — regular income, steady cash flows, and strong dividend yields. While the environment is riskier today due to higher interest rates, investing in REITS offers the promise of dividend income.

Here are two of the top Canadian REITS to buy today.

Doctor talking to a patient in the corridor of a hospital. — Source: Getty Images

Northwest Healthcare Properties REIT

This one is a controversial one, as a dividend cut last year shaved the stock in half. It never inspires confidence when a company has to cut its dividend. Yet, looking to the future, I still see promise in Northwest Healthcare Properties REIT (TSX:UN).

The business is solid. Northwest has a strong, defensive portfolio of medical properties. This includes buildings such as hospitals, medical office buildings, and rehabilitation centres. These buildings are characterized by long-term tenancy, with a weighted average lease expiry of 13.2 years, and 83% of these leases are subject to inflation indexation. Also, they’re often supported by government funding. It is this stability that gives me comfort in Northwest.

The REIT’s latest results were boosted by strong revenue growth and a strengthening balance sheet. Revenue for the nine months ended September 30, 2023 increased 15.3%, and a portfolio occupancy of 96%. Furthermore, noncore assets continued to be disposed of, and debt amendments and extensions were implemented.

Today, Northwest Healthcare REIT is trading at $4.95 and yielding a very generous 7.2%.

Chartwell Retirement Residences

The other top Canadian REIT that I’d like to highlight in this article is Chartwell Retirement Residences (TSX: CSH.UN). Like Northwest, Chartwell’s business is benefitting from one of the strongest trends today, the aging population. Unlike Northwest, however, Chartwell has not got into any trouble with its debt-load or dividend.

Chartwell is Canada’s largest provider and owner of seniors housing communities from independent living to long-term care. Recent economic troubles have certainly been challenging for Chartwell. Yet its dividend has remained in tact. In fact, Chartwell’s monthly dividend is 4.1% higher versus five years ago.

This is possible because of strong business fundamentals, as this business has proved to be quite resilient. This is evident when we look at Chartwell’s occupancy levels, which are rising fast. In fact, occupancy rose 80 basis points sequentially in September to 82.1%. Also, it rose 100 basis points in October to 83.1%, and another 110 basis points in November to 84.2%. While this is below rates of above 90% before the pandemic, it’s certainly rapidly heading in the right direction.

Chartwell is currently yielding a very attractive 5.17%, and the stock has risen 25% in the last year. As this REIT continues to see increasing occupancy levels, and as it continues to pay down its debt, the future will look increasingly positive.

The bottom line

Canadian REITs like the two that I’ve discussed in this article offer investors a good source of dividend income. While we should always monitor debt levels, especially today with higher interest rates, these investments are great ways to gain exposure to meaningful passive income.