For investors keen on investing in Canadian real estate, there are certainly a number of options available.. Of course, buying one’s own primary residence or rental properties is an excellent option. However, for those who don’t want the headaches that come with homeownership (or being a landlord), investing in a real estate investment trust (REIT) can also be a great option.
Of course, not all REITs are the same, as they cover a wide range of asset classes and real estate types investors should be aware of. But the good news is that in the Canadian market, there are plenty of options to consider as great dividend stocks to hold, particularly for those betting on interest rates continuing to come down.
Here are three of my top picks right now in this sector.
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Dream Industrial REIT
Dream Industrial REIT (TSX: DIR.UN) is an open-ended, unincorporated REIT operating in Canada, the United States and Europe. The company owns, manages and operates approximately 339 industrial assets in these regions.
The REIT offers an extremely steady source of income to shareholders interested in the industrial real estate space. Industrial real estate (warehouses and distribution centres) should continue to benefit from long-term secular trends in how goods are shipped. REITs like Dream Industrial that own prime industrial real estate near city centres could continue to see strong rent growth, with Dream Industrial recently reporting average in-place rent growth of more than 30% across its wholly-owned portfolio.
Despite the higher interest rate environment, Dream Industrial remained focused on optimizing its cost of debt and maintaining a strong and flexible balance sheet. This REIT continues to be a dominant presence in the industrial real estate sector and continues to be one of my top picks for Canadian investors as such.
SmartCentres REIT
SmartCentres REIT (TSX: SRU.UN) is one of Canada’s largest fully integrated REITs. The company’s impressive portfolio of more than 190 strategically located retail properties in every province across the nation has impressive occupancy of more than 98% across its portfolio, with some of the best world-class retailers anchoring most locations.
Yes, retail-focused real estate has been under pressure for some time. However, the company’s focus on owning the best properties with the best anchor tenants in key markets across Canada makes this stock worth looking at.
The REIT recently raised $350 million in capital via a private placement, at 5.162%, with unsecured debentures. This money will be used to refinance existing debt. So, as interest rates come down and the company rolls its debt forward, the stock could become much more attractively valued. On a current basis, I think this is true, considering the stock’s current dividend yield of more than 7%.
SmartCentres Real Estate Investment Trust recently closed its previously announced private placement of $350 million aggregate principal amount of 5.162% Series AA senior unsecured debentures. The company will use the net proceeds by selling the Series AA debentures to refinance existing debt. It includes the repayment of its $100 million Series O senior unsecured debentures.
Moreover, SmartCentres Real Estate Investment Trust declared a dividend distribution of $0.15417 per unit, representing $1.85 per unit on an annualized basis.
Canadian Apartment Properties REIT
Last but certainly not least on this list, we have Canadian Apartment Properties REIT (TSX: CAR.UN). CAPREIT is a multi-unit residential rental properties provider with a portfolio of townhouses, apartments, and manufactured home communities in Canada and the Netherlands. The REIT has expanded and diversified across the most robust urban growth markets in Canada and Europe, with a decade-long operating history.
This trust has seen a rather strong performance of late, with some clear ties to interest rates boosting the value of its underlying portfolio. As is the case with the other REITs on this list, if interest rates come down, that’s a good thing overall for this sector. However, for residential-focused REITs such as this one, the benefits could be much larger.
In my view, this REIT provides the best exposure to longer-term trends for residential housing in Canada. For those looking to play this sector, this is how I’d do it right now.
