Passive-income investors looking for income stocks to stash on their radar this January may wish to consider tuning into some of the more beaten-down sectors and industries. Indeed, the real estate investment trust (REIT) basket has been feeling the pains in recent months, giving back a portion of the relief gains enjoyed since the depths of early 2024.
While the REIT scene will face intense action in response to the Bank of Canada’s (BoC) moves, I still think the wild ride will be worthwhile, especially for the oversold, undervalued REITs starting to see their yields nudge higher again. Indeed, if the BoC cuts as many times as expected this year, perhaps two more than the U.S. Federal Reserve, and inflation on this side of the border plays by the rules (look for it to touchdown with the 2% target), the REITs could be back in rally mode.
Aside from the REIT scene, there are some great opportunities in the big banks. Each industry faces its unique slate of pressures. In this piece, we’ll check out two high-yield names that may be worth jumping into now that most others have had the opportunity to throw in the towel.
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BMO Equal Weight REITs Index ETF
First, let’s start with a broad index exchaange-traded fund (ETF) that provides broad exposure to Canada’s REIT scene. BMO Equal Weight REITs Index (TSX:ZRE) stands out as a great way to diversify yourself across the real estate scene. With a fat 5.25% yield and an equal weighting to a wide range of well-run REITs (large and small), you’re covering most bases with the fund. ZRE aims to follow the Solactive Equal Weight Canada REIT Index, which is comprised of around 20 or so of the best-in-breed REITs trading on the TSX Index.
With a somewhat reasonable 0.61% management expense ratio (MER), and a heavier weighting (around 42% of the fund) to the retail REITs and multi-family residentials (around 27%), ZRE stands out as one of the most competitive equal-weighed REIT indices on the market.
Though you could save yourself on the MERs by picking and choosing your own REITs, I like the ZRE as a one-stop-shop play for smaller retail investors who want to save themselves the commission or those keen on maintaining an equal weighting across the Canadian REIT scene over time. Indeed, bigger isn’t necessarily better when it comes to the REITs!
Toronto-Dominion Bank
Toronto-Dominion Bank (TSX:TD) is a top Canadian bank stock to watch in 2025 as it attempts to put a horrid 2024 behind it. Indeed, it’s time for investors to focus on the new and improved TD Bank, with new managers coming aboard and revamped practices to ensure it won’t be caught skating offside ever again. Indeed, the money-laundering headwinds aren’t going away just because we’ve turned a chapter on a new year. That said, TD is in great shape to revisit prior all-time highs under its new leadership team.
Indeed, TD is on a mission to prove it still has what it takes to be one of the greats in the banking scene. With rumours swirling around a potential sale of its stake in Charles Schwab, questions linger as to what the big bank could do with the extra cash. If it can’t expand south of the border due to restrictions, perhaps it can kick off an aggressive share repurchase program, all while it doubles down on high-tech initiatives (think AI) so that it can become one of the most future-proof financial firms in the country.
