With higher interest rates and a cost of living that’s on the rise, the pension payments you’re getting may not be enough, especially for Canadians who are playing it safe and putting their savings in low-risk investments, such as guaranteed investment certificates (GICs), which better protect your principal but have historically delivered lower long-term returns than higher-risk asset classes like stocks.
If you need a boost in your monthly income, you can make your very own personalized pension. Start by checking out these Canadian retail real estate investment trusts (REIT). It is a good area to begin your quest for monthly income (but don’t expect much growth).
CT REIT
The CT REIT (TSX:CRT.UN) portfolio consists of a more than 30 million gross leaseable area across over 370 retail properties, four industrial properties, a mixed-use commercial property, and a development property.
The retail REIT has generally been under pressure, as interest rates have gone higher since 2022, and its growth has slowed due to a higher cost of capital. However, its cash flows remain resilient with investment-grade Canadian Tire (TSX:CTC.A) as its major tenant.
Its other top 10 tenants, including Save on Foods, Bank of Montreal, Tim Hortons, Sleep Country, Dollarama, and Walmart, contribute approximately 4.2% of its annualized base rent.
The stock has declined more than 20% since the beginning of 2022, while it has raised its monthly cash distribution by 10%. To be sure, the REIT has been increasing its cash distribution for about 11 consecutive years with a sustainable payout ratio. As a reference, its five-year cash distribution growth rate is 3.9%.
CRT.UN Dividend data by YCharts
CT REIT maintains a high occupancy rate of about 99.5% and has a weighted average lease term of roughly eight years – one of the longest in the sector.
Although its funds from operations have been resilient, its stock price has slid, resulting in an attractive yield of 6.9% at $13.36 per unit at writing. Valuation-wise, the stock is almost back at the 2020 pandemic low.
Currently, analysts target a 12-month stock price of $15.50, which represents near-term upside potential of 16%. If interest rates were to decline, it should help lift the stock.
Perhaps an area in Canadian REITs that could experience above-average growth compared to the rest of the industry is industrial REITs, for example, Dream Industrial REIT (TSX:DIR.UN).
Dream Industrial REIT
In its May presentation, Dream Industrial REIT noted that the market rent is much higher than its in-place rent. So, it could raise rents when it comes time to finding new tenants for leases that are maturing.
Specifically, management notes that the mark-to-market potential is 44% higher for its Canadian portfolio and 8% for its European portfolio. Over the last year, the market rent has also been increasing by 4.9% and 6.5%, respectively, in the respective markets, suggesting that demand for industrial properties persists. Dream Industrial REIT’s recent occupancy rate was 96%.
From $12.83 per unit at writing, analysts think the stock could potentially climb 24% over the next 12 months. The industrial REIT doesn’t tend to increase its cash distribution, but it offers a nice yield of about 5.5%, which appears to be safe.
