Having well-diversified holdings is an essential step in building a robust and efficient investment portfolio. However, while it’s important to own companies across many sectors and industries, some of the best investments to buy are in the real estate sector through top Canadian real estate investment trusts (REITs).
Real estate is an essential industry, constantly expanding and offering consistent monthly cash flow. This means you can find top Canadian REITs to buy that offer higher growth, significant monthly income, or a combination of both.
Plus, another benefit for Canadian investors is the vast number of REITs to consider, allowing investors to pick and choose which of the best REITs fit their portfolios and personal preferences, whether it be stocks with more capital gains potential or that offer more passive income.
So, if you’re looking to buy top Canadian REITs for your diversified portfolio, here are three of the best to buy in July.
A top residential real estate stock
In the current market environment, some of the best qualities that top stocks have are businesses with robust earnings potential, ones that can consistently generate cash flow regardless of the state of the economy, as well as ones with diversified operations, to help mitigate risk.
That’s why one of the top Canadian REITs to buy in July is Morguard North American Residential REIT (TSX: MRG.UN).
As a residential REIT, Morguard is one of the most defensive real estate stocks you can buy. Residential real estate is well-known as one of the most defensive industries in the economy since everyone needs somewhere to live.
Generally, paying your mortgage or the rent on your apartment is where consumers spend their paychecks first, making Morguard’s cash flow generation highly reliable.
In addition, Morguard owns properties in several states across the U.S. as well as in parts of Canada, diversifying its operations to mitigate regional risks.
This allows Morguard to pay a significant distribution, with a current yield of roughly 4.5%, while also retaining additional cash flow to invest in the future expansion of its portfolio.
Plus, not only does it offer an attractive yield, but with the stock trading at just under $16.50 at the time of writing and having an average analyst target price of $19.50, it also offers significant capital gains potential, making it one of the top Canadian REITs to buy in July.
Two top Canadian retail REITs to buy in July
In addition to a top residential REIT like Morguard, investors can also find value by investing in retail REITs this July, such as CT REIT (TSX: CRT.UN) and First Capital REIT (TSX: FCR.UN).
CT REIT’s majority owner is Canadian Tire, one of the largest and best-known retail brands in Canada. Furthermore, Canadian Tire is also its largest tenant, accounting for roughly 90% of CT REIT’s revenue.
So, an investment in CT REIT is also largely a bet on Canadian Tire. Over the last year, Canadian Tire has faced significant challenges yet remains highly profitable and continues to have a manageable dividend; therefore, CT REIT is certainly one of the top Canadian REITs to buy today.
In fact, in the 10 years since the stock began trading, CT REIT has grown both its revenue and distribution every single year, including through the pandemic years when many of its retail REIT peers were impacted significantly.
Plus, its current yield of roughly 6.5% is one of the highest yields of any top Canadian REIT, making CT REIT an ideal investment for passive-income seekers.
First Capital, however, was impacted much more significantly than CT REIT during the pandemic. With its recovery well underway now, it offers investors value and has plenty of growth potential over the coming years.
In fact, of the five analysts covering First Capital, four rate the stock a buy, with the remaining analyst giving it a hold rating. Not to mention, it also offers an attractive dividend yield of more than 5.3% today.
So, if you’re looking for top Canadian REITs to buy now, there’s no question that both First Capital and CT REIT are two of the top picks to consider.
