The Bank of Canada (BOC) just initiated the first rate cut, and G7 central banks are watching in awe. In a press conference on June 5, 2024, BOC Governor Tiff Macklem said, “If inflation continues to ease, and our confidence that inflation is headed sustainably to the 2% target continues to increase, it is reasonable to expect further cuts to our policy interest rate.”
Stock market investors welcomed the 25 basis points cut, which brought down the policy rate to 4.75%. The impact was immediate, as all 11 primary sectors posted gains, and the index rose 0.75% to 22,145.02. Around 68% of TSX stocks, including real estate stocks, advanced following the rate cut announcement.
With this highly anticipated tailwind, income investors can double Whitecap Resources (TSX: WCP) and First Capital REIT (TSX: FCR.UN) holdings to earn generous monthly passive income.
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Risk management program
Whitecap Resources is among the steadiest performers, notwithstanding the high interest rate environment. At $10.05 per share, current investors enjoy a 16.85% year-to-date gain on top of the 7.41% dividend yield. The energy sector’s year-to-date gain is 16.47%.
The $5.9 billion oil-weighted growth company boasts a premium asset base (light oil), which is a solid foundation for growth. Whitecap develops petroleum and gas properties in British Columbia (West Division) and the Central Alberta and West Saskatchewan regions (East Division).
Whitecap’s ongoing risk management program reduces revenue volatility, funds capital expenditures, and sustains shareholder cash dividends. The payout ratio is 57.93%.
Solid financial results
First Capital trades at a slight discount, although the price could increase gradually with more rate cuts. At $14.72 per share (-1.77% year to date), you can partake in the 5.87% dividend. Moreover, the lowering of interest rate is timely, as this real estate investment trust (REIT) has reported solid first-quarter (Q1) 2024 results.
The $3.12 billion retail landlord owns and operates grocery-anchored properties, mostly open-air centres, in areas with strong demographics, fundamentals, and leasing activities. In the three months ending March 31, 2024, net income rose 53.6% to $74.8 million compared to Q1 2023. The total portfolio occupancy was 96.2%.
Its president and chief executive officer, Adam Paul, said, “The strong fundamentals underpinning First Capital’s grocery-anchored retail portfolio, together with the successful execution of our capital allocation strategy, continue to deliver solid operating and financial results.”
Paul added, “The first quarter of 2024 was characterized by healthy leasing metrics, solid earnings growth and a stronger balance sheet, all of which will serve us well as we look ahead.” Notably, the portfolio average net rental rate increased 1.2% ($0.28 per square foot) versus Q4 2023 to a record $23.62 per square foot. The increase was net of closures due to tenant openings, rent escalations, and renewal lifts.
Also, during the quarter, First Capital disposed of non-grocery-anchored shopping centres worth $147 million in some development and density sites in Canada. The REIT’s long-standing goal is to pursue and unlock development potential and generate a stable and growing cash flow for investors through targeted investments.
Monthly income stream
Whitecap Resources and First Capital REIT are ideal investment options for income-focused investors. Besides the attractive dividend yields, invested capital transforms into monthly passive-income streams for years.
