Dividend stocks can be a safe place to hide if you are worried about tariff wars and economic concerns. If you like monthly passive income, real estate investment trusts (REITs) are a good place to look.
Firstly, REITs are beaten down and incredibly cheap. In many instances, these stocks are at some of their lowest valuations in years.
Secondly, REITs pay well-protected income streams. REITs pay monthly distributions because they collect rent monthly. Many REITs have seen their rental income drastically increase, but they have not increased their distributions at the same rate. As a result, many REIT payout ratios are healthy and sustainable.
If you are wondering what REITs are safe to hold for income right now, here are three worth buying today.
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A grocery-anchored REIT for distribution income
Choice Properties REIT (TSX:CHP.UN) is a derivative (and perhaps cheaper) way to play Loblaw’s success (Canada’s largest grocery chain). It was spun out from Loblaws several years ago, and it remains one of Loblaw’s largest landlords.
With a market cap of $9.9 billion, it is Canada’s largest REIT. Its centres tend to focus on essentials (like grocery and pharmacy), so it maintains a very steady tenant base. The REIT has a huge land bank that remains untapped. That provides it growth optionality for the future.
Choice stock yields 5.6% right now. This stock won’t provide huge capital upside, but you will benefit from a large and stable distribution.
A residential real estate stock operating in the U.S.
BSR REIT (TSX:HOM.UN) is a stock to buy if you want to own something with exposure to the United States. The Canadian dollar is weak. You can buy BSR to get exposure to the U.S. dollar.
BSR operates a portfolio of garden-style apartments primarily in Texas. It has upgraded its portfolio into some of the top growth regions in North America.
It just announced the sale of a big part of its portfolio to a large U.S. residential REIT. The deal substantiated the massive discount the REIT trades to its real market value. The stock only modestly reacted. It still trades significantly below that carrying value.
BSR trades with a very attractive 4.3% yield. It has a record of increasing its distribution. It will be interesting to see what it does with the proceeds of its large asset sale.
An industrial REIT with an elevated yield
Dream Industrial REIT (TSX:DIR.UN) is another REIT to buy for monthly dividends. It operates a strong portfolio of industrial properties across Canada and Europe.
Dream focuses on centrally-located multi-tenanted properties. These tend to be economically resilient through more challenging macro environments.
Dream has several levers for growth. Its average portfolio rent remains considerably below market. This just means it has ample room to keep increasing rents without becoming non-competitive.
In the long term, it will have ample land for development. Data centre development could be a growth opportunity in its quiver.
Dream yields 6.14% right now. It hasn’t ever increased its distribution, but its payout ratio has steadily come down over the past few years. Like the other stocks above, it remains cheap and below its private market value. While you wait for the value to unlock, you get a nice monthly distribution.
