Prediction Time: 2 Canadian REIT Stocks Ready to Rise

Looking for safety in REITs? Then look into industrial and healthcare properties, which these two offer up in bulk.

Amy Legate-Wolfe

Amy became interested in investing in 2018 after having her first daughter. After receiving a masters degree in journalism from Western University, she became frustrated that the finance industry remained a confusing place for Canadians like her: new parents, millennials, and other young people who needed to understand their finances. Now, Amy focuses on tech companies and renewable energy for growth opportunities, coupling that with long-term investing strategies and equities. She also provides investors with a daily newsletter, Canada Stock Digest, for daily market updates. Before joining Motley Fool Canada, she wrote for major news organizations including HuffPost, CTVNews.ca, and CBC. When she’s not researching investing strategies, Amy’s time is pretty much monopolized by her two wild daughters, but in what little spare time she has she loves to do yoga, go on walks with her dog, and travel with her husband. Follow Amy on LinkedIn and Canada Stock Digest. Favorite Investment Quote: “October: This is one of the particularly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February.” – Mark Twain

Published September 16, 2024 8:00 pm EDT

With interest rates starting to come down, Canadian investors should be buzzing about the potential of real estate investment trusts (REITs) as a great investment right now! Lower interest rates typically lead to cheaper borrowing costs. This can boost property values and enhance rental income for REITs. Plus, these investment vehicles often provide attractive dividend yields, making them an appealing choice for those seeking passive income. So, why not take a closer look at REITs and see how they can help your investments soar with these two investments?

NorthWest REIT

NorthWest Healthcare Properties REIT (TSX:NWH.UN) is shaping up to be an appealing investment for Canadian investors looking to ride the wave of healthcare real estate. With a market cap of approximately $1.24 billion, NWH.UN has been executing a strategic review that has already yielded significant asset sales totalling around $1.6 billion. This proactive approach is helping to streamline operations and bolster its balance sheet. All while maintaining a solid occupancy rate of 96.5% across its global portfolio. Notably, the REIT’s same-property net operating income (SPNOI) grew by 4.2% in the second quarter of 2024. Thereby underscoring its capacity to generate steady income even amidst market fluctuations.

One of the key highlights for NWH.UN is its focus on long-term leases, boasting a weighted-average lease expiry (WALE) of 13.4 years. This stability provides a cushion against market volatility and showcases the trust tenants have in NWH.UN as a reliable landlord. The REIT’s commitment to the healthcare sector positions it favourably, especially with an aging population and increased demand for healthcare services. As Craig Mitchell, chief executive officer of NorthWest, stated, “Our portfolio performance continues to reflect the strong demand for healthcare real estate, especially in SPNOI growth driven by strong occupancy and rent collection.”

Furthermore, with a forward annual dividend yield of approximately 7.16% at writing, NWH.UN offers an enticing income stream for investors. The recent sale of its U.K. portfolio not only improves liquidity. It also enhances earnings potential, expected to increase adjusted funds from operations (AFFO) by about $0.06 per unit on an annualized basis. As the REIT continues to simplify its operations and strengthen its financial profile, now may be an ideal time for investors to consider adding NorthWest Healthcare to their portfolios.

Granite REIT

Granite REIT (TSX:GRT.UN) is shaping up to be a standout investment option for those looking to capitalize on the booming real estate sector. With a market cap of approximately $4.74 billion, Granite demonstrated impressive earnings momentum. In the second quarter of 2024, the REIT reported a net operating income (NOI) of $116.8 million. Up from $108.6 million the previous year, driven by successful developments and contractual rent adjustments. Furthermore, Granite’s funds from operations (FFO) rose to $83.5 million. Thus translating to $1.32 per unit, highlighting its strong operational performance and ability to generate steady cash flow.

One of the key attractions of GRT.UN is its focus on maintaining high occupancy rates and favourable lease terms. As of June 30, 2024, the occupancy rate stood at 94.5%, with a same property NOI growth of 6.0%. This is a testament to the REIT’s ability to manage its portfolio effectively and respond to market demands. With a solid average rental rate spread of 25% over expiring rents, Granite is well-positioned to benefit from the ongoing demand for industrial and logistics space, particularly as e-commerce continues to drive growth.

In addition to its impressive operational metrics, GRT.UN also offers a forward annual dividend yield of 4.37% at writing. Thus making it an appealing choice for income-focused investors. The REIT’s disciplined approach to capital management. This includes a recent normal course issuer bid that repurchased over 644,000 stapled units, demonstrates its commitment to enhancing shareholder value. With its strategic initiatives and robust earnings momentum, Granite is not only a great addition to any investment portfolio. It also a company poised for long-term success in the ever-evolving real estate landscape.