We’re all looking for passive income, and real estate investment trusts (REIT) are certainly one of the first options many consider. These are dividend stocks that must pay out 90% of net income to shareholders. And that usually comes in the form of dividends.
Yet there tends to be a lot of focus on the larger institutions. That being said, small-cap REITs offer great opportunities. Let’s look at why.
Image source: Getty Images
Small over large
Large-cap companies certainly come with a lot of benefits, as well as a strong balance sheet during tough times. They tend to be more transparent. And there are certainly companies out there that hold a healthy balance sheet, resilient business models, and a favourable profile when it comes to volatility.
However, small-cap companies have more benefits when they also provide a resilient business model and healthy balance sheet. Instead of looking for the blue-chip companies that provide lower growth over time, you can get in on the chance of higher returns along with a healthy stock.
Small-cap stocks are those that fall between a market cap of $300 million and $2 billion, and can see far faster appreciation compared to their large-cap peers. Which is why today we’re going to focus on two REITs that should provide just that.
Primaris
Primaris REIT (TSX: PMZ.UN) is a small-cap industrial REIT with a current market cap at just $1.3 billion. The Canadian industrial REIT owns and operates a portfolio of strategically located distribution and warehouse facilities. And this is a prime reason for more growth in the future.
After some shrinking in the beginning of last year, the company saw a rebound in terms of total revenue. First quarter results brought in $96.4 million in rental revenue, which fell to $96 million by the second quarter. This led the company to tighten its 2023 guidance, though it raised it in the process. It was for good reason, as rental revenue climbed to $104.8 million by the third quarter, and $113.8 million by the fourth.
Meanwhile, Primaris expects further increases in occupancy for 2024, after achieving $13.9 million in net income for 2023. With so much momentum under way, and more to come, it’s a great time to consider Primaris stock. Especially with a 6.18% dividend yield.
NorthWest
Another REIT making a comeback is small-cap NorthWest Healthcare Properties REIT (TSX:NWH.UN). Again, the company is in an essential industry that’s only growing. With a market cap of $1.2 billion, it has shrunk in valuation over the years as the company looked to strengthen its balance sheet.
In the last year, NorthWest stock has done just that. It sold non-core assets and brought its debt back to manageable levels. All while renegotiating to refinance debts at a lower rate. Investors are therefore interested once more, with 2024 looking like perhaps the year we see it turnaround to former levels.
With a dividend yield at 7.69% as of writing, NorthWest stock looks like a company that’s offering growth in revenue, returns, and dividends. That makes it another of the small-cap REITs you can gain access to for dividends and growth in 2024 and beyond.
