The Top Canadian REITs to Buy as Inflation Drops

Looking for growth and income? REITs offer this up in bulk, but only from the right ones.

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 20, 2024 4:10 pm EDT

For Canadian investors, real estate investment trusts (REIT) are making a comeback in 2024 as rising interest rates start to stabilize. With interest rates cooling down, REITs are becoming an attractive option again, providing steady income and potential capital appreciation. In fact, the Canadian REIT index has shown signs of recovery, with a 6.5% increase in the first half of the year. REITs offer diversification through real estate investments, making them a great way to build long-term passive income, especially when the real estate market starts bouncing back. So let’s look at some strong options.

View of high rise corporate buildings in the financial district of Toronto, Canada — Source: Getty Images

NorthWest

NorthWest Healthcare Properties REIT (TSX:NWH.UN) on the TSX is a solid pick for investors looking for both income and stability. With a forward annual dividend yield of 6.8% at writing, NWH.UN offers an attractive income stream. Despite a challenging year, its quarterly revenue growth of 11.1% signals a strong recovery in the making. A return on assets of 2.9% and a beta of 1.1 reflect its ability to weather volatility. As one expert put it, “NorthWest Healthcare REIT’s diverse portfolio in global healthcare infrastructure ensures resilience even during market downturns.”

Financially, NWH.UN is on firm ground with an enterprise value of $4.8 billion and operating cash flow of $81.8 million. While its high payout ratio of 299.4% might seem concerning, this is typical for REITs as they are structured to distribute most of their income to shareholders. Investors seeking a combination of reliable dividends and long-term growth should keep this healthcare REIT on their radar, as its diverse international portfolio promises steady performance.

Granite REIT

Granite Real Estate Investment Trust (TSX:GRT.UN) is another standout REIT on the TSX, particularly for those focused on stability and earnings growth. With a market cap of $4.8 billion and a forward price/earnings (P/E) of 13.6, GRT.UN strikes a balance between value and growth. Its quarterly earnings growth year-over-year of 21.9% is impressive, showcasing the company’s ability to drive revenue. Additionally, GRT.UN offers a forward annual dividend yield of 4.2% at writing, providing a consistent income stream for investors.

The REIT’s solid operating margin of 78.1% and return on equity of 4.3% underscore its efficient management. As one analyst noted, “Granite REIT’s strategic focus on industrial real estate, particularly in logistics, has positioned it well for long-term growth.” For Canadian investors seeking exposure to real estate with lower risk, GRT.UN’s diversified portfolio and solid financials make it a strong and safe choice.

CT REIT

CT REIT (TSX:CRT.UN) is a great and stable investment option, particularly for investors seeking exposure to retail real estate. As the real estate arm of Canadian Tire, CRT.UN benefits from having a well-established and reliable tenant base, anchored by the iconic Canadian retailer. The REIT offers a forward annual dividend yield of 5.8% at writing, which is attractive for income-focused investors. Despite a slight dip in quarterly earnings growth, the stock has seen a 7% increase in price over the last year, reflecting its overall stability and resilience in the market.

Financially, CRT.UN is well-positioned, with a market cap of $3.6 billion and a strong operating margin of 76.4%. Its forward P/E ratio of 13.3 suggests that investors expect continued earnings growth, and its return on equity of 6.5% reflects solid management of shareholder funds. As one analyst put it, “CRT.UN’s connection to Canadian Tire and its focus on essential retail properties provide it with a solid foundation, making it a low-risk option in the real estate sector.” Investors seeking both steady income and long-term growth potential will find CRT.UN a compelling choice.

Bottom line

In a nutshell, whether you’re eyeing NWH.UN, GRT.UN, or CRT.UN, these REITs offer Canadian investors a solid mix of stability, reliable dividends, and growth potential. Each one taps into key sectors like healthcare, industrial, and retail, making them great long-term picks as REITs continue their comeback. With steady cash flow and strong portfolios, these investments are perfect for anyone looking to add some low-risk real estate exposure to their portfolio!