There’s a reason why Canadian real estate investment trust (REIT) stocks are some of the best long-term investments you can buy. Real estate has always been one of the oldest, most dependable, and most proven industries in which to build wealth. And while buying physical property has its place, owning high-quality REITs is one of the most efficient ways to gain exposure without the hassle of being a landlord.
REITs are built on reliable, defensive operations that generate significant monthly cash flow, which they return to investors in the form of consistent distributions. At the same time, because many of these real estate businesses are actively expanding their portfolios, reinvesting capital, and growing earnings, they also offer the potential for attractive long-term capital gains.
Therefore, whether you’re looking to maximize passive income, earn a solid total return, or just stabilize your portfolio with a low-volatility industry, the right Canadian REIT stocks can offer a tonne of benefits, especially when you buy and hold them for the long haul.
So, with that in mind, here are three top Canadian REIT stocks to buy today and hold for the next quarter-century.
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Two top residential REIT stocks for Canadian investors to buy now
There’s no question that some of the best and most reliable real estate stocks you can buy are residential REITs such as InterRent REIT (TSX:IIP.UN) and Canadian Apartment Properties REIT (TSX:CAR.UN).
Residential REITs are some of the best stocks that Canadian investors can buy and hold for the long haul because they are highly defensive, consistently return cash to investors and have plenty of growth potential.
Furthermore, in this environment, many REITs are still trading off their highs after being negatively impacted by higher interest rates over the last few years.
For example, right now, InterRent trades at a forward price-to-funds-from-operations (P/FFO) ratio of just 17.4 times, which is well below its five-year average forward P/FFO ratio of 23.9 times. In addition, its current yield of just over 3.5% is also well above its five-year average forward yield of just 2.5%.
Meanwhile, Canadian Apartment Properties (CAPREIT) is in a similar situation. Today, it’s trading at a forward P/FFO ratio of just 16.6 times, below its five-year average of 20.1 times. Furthermore, its current yield of 3.65% is significantly higher than its five-year average of just 3%.
Therefore, not only are these two Canadian REIT stocks some of the best investments to buy now for reliability, but if you gain exposure before they inevitably recover, not only can you buy them while they’re ultra-cheap, but you can also lock in a much higher-than-normal dividend yield.
A high-yield REIT that consistently increases its cash flow
If you’re looking to buy a Canadian REIT stock that can generates even more passive income, though, CT REIT (TSX:CRT.UN), is one you’ll certainly want to consider.
CT REIT is a retail REIT, which can still be excellent long-term investments but are typically far less defensive than residential REITs.
However, what separates CT REIT from many of its peers is that its majority owner and largest tenant, which accounts for over 90% of its revenue, is Canadian Tire, one of the best and most well-known retailers in the country.
This gives CT REIT a tonne of reliability and explains why it’s able to consistently increase both its revenue and its distributions to investors every single year since it went public. That includes even the pandemic when retail REITs were some of the hardest-hit real estate stocks on the TSX.
Furthermore, like InterRent and CAPREIT, CT REIT is also trading off its highs, making now an excellent time to gain exposure.
For example, right now, it trades at a forward P/FFO ratio of 10.9 times, below its five-year average of 12.0 times. More importantly, though, its forward yield of roughly 6.3% is much higher than its five-year average of 5.65%.
So, if you’re looking to take advantage of the market environment and buy high-quality Canadian REIT stocks while they’re undervalued, not only can you buy at a discount today, but you can lock in a much higher yield to significantly boost the passive income you’re generating.
