Pensioners: 2 Stocks That Cut You a Cheque Each Month

Canadian pensioners who want more monthly income can explore Canadian REITs.

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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 Chart

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.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Kay Ng has positions in Bank of Montreal and Canadian Tire. The Motley Fool recommends Dream Industrial Real Estate Investment Trust and Walmart. The Motley Fool has a disclosure policy.

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