Recession-resistant real estate investment trusts (REITs) are becoming more appealing to income-seeking investors in the face of market volatility. These trusts are particularly attractive because they focus on sectors that maintain demand, even in difficult economic conditions. Among the top Canadian property trusts offering stability and consistent income are Canadian Apartment Properties REIT (TSX:CAR.UN) and Slate Grocery REIT (TSX:SGR.UN). Both REITs have shown resilience in past performance and future outlooks.
The REITs
Canadian Apartment Properties REIT, one of Canada’s largest residential property REITs, provides a strong defensive position, particularly due to its focus on apartments across major urban markets. As of its most recent earnings report, CAR.UN showed a revenue of $1.11 billion. Plus, it has a healthy operating margin of 58.96%. The trust’s profitability is strong, reflected in a solid profit margin of 26.31%. Plus, it continues to be a reliable player in the housing market, which tends to perform well even during economic downturns. With its stable rental income from residential units, CAR.UN is well-positioned to weather a recession. Furthermore, the trust has maintained a decent dividend yield of 3.57% over the past year, attracting investors looking for consistent income.
Slate Grocery REIT offers an appealing diversification with its focus on grocery-anchored retail properties — a sector known for its recession-resistant characteristics. This focus on essential services like food retailing provides strong stability, especially when consumers continue shopping for groceries during tough times. As of its most recent quarter, Slate Grocery REIT reported a solid revenue of $217.87 million, showing year-over-year growth of 8.4%. Its profitability remains strong, with a net income of $38.28 million. Additionally, with a forward annual dividend yield of 8.80%, Slate Grocery REIT offers a high return to investors seeking reliable income, even during uncertain economic conditions.
Future outlook
Looking forward, both CAR.UN and SGR.UN are well-positioned for steady income generation. CAR.UN’s focus on urban residential properties remains a solid bet as cities continue to drive demand for rental housing. This demand is amplified by Canada’s growing population and urbanization trends, ensuring CAR.UN’s continued relevance. Meanwhile, Slate Grocery’s focus on grocery stores and essential retail ensures that its income will remain stable, even as other retail sectors might struggle during recessions.
In terms of future growth, CAR.UN is set to benefit from its substantial portfolio of residential properties in desirable Canadian locations. Its focus on acquiring and managing high-quality residential rental properties ensures steady revenue streams.
Slate Grocery REIT’s strategic investments in grocery-anchored properties. These properties tend to outperform during downturns, providing Slate with a distinct advantage, especially in a market that’s expected to face some headwinds. Its approach of focusing on low-risk, high-demand tenants makes it a solid choice for investors seeking both stability and growth potential.
Showing value
From a financial perspective, both REITs show strong fundamentals. CAR.UN’s trailing price-to-earnings (P/E) ratio of 23.84 and Slate Grocery’s trailing P/E ratio of 15.51 reflect the market’s confidence in these companies. Slate Grocery’s lower valuation makes it particularly attractive for value-conscious investors. Additionally, both trusts are committed to maintaining strong dividend payouts. These provide a significant source of passive income for investors, further reinforcing the appeal.
Looking at past performance, both CAR.UN and SGR.UN have demonstrated histories of resilience, with CAR.UN having weathered the 2008 financial crisis and emerging stronger. Similarly, Slate Grocery has built a solid track record by focusing on grocery-anchored properties, which have performed well even when other retail sectors faced struggles. Both trusts have consistently maintained their dividend payouts, ensuring that investors can rely on them for steady income.
Bottom line
Both CAR.UN and SGR.UN offer appealing opportunities for long-term investors who prioritize stability and income. Whether it’s CAR.UN’s extensive residential portfolio or Slate Grocery’s essential retail focus, both trusts provide the defensive characteristics that can help investors navigate uncertain times while enjoying reliable dividend payouts. By investing in these recession-resistant REITs, Canadians can position themselves for steady income regardless of economic fluctuations.
