There’s no question that real estate stocks are some of the best to buy for the long haul, especially when you can buy them while they’re cheap.
Real estate is one of the best long-term investments because it’s one of the oldest and most established sectors; it isn’t going anywhere, and it offers investors plenty of attractive options.
Most real estate stocks provide the potential for both capital gains and passive income through their distributions. And while some focus more on growth and others on income, that flexibility makes the sector attractive, not just for its long-term reliability and resiliency, but also for the ability to match your personal investing style.
And right now, with all the uncertainty in the economy and the volatility across markets, many high-quality Canadian REITs are trading off their highs, making real estate one of the best sectors to buy stocks in today.
So, if you’ve got cash on the sidelines and are looking to put it to work, here are four of the best opportunities for long-term investors to consider right now.
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Two top residential real estate stocks to buy now
Of all the subsectors in the real estate sector, there’s no question that residential real estate is one of the best to invest in because it’s so defensive and offers significant long-term return potential.
And while there are plenty of top residential REITs in Canada, two of the best are Canadian Apartment Properties REIT (TSX:CAR.UN), also known as CAPREIT, and Minto Apartment REIT (TSX:MI.UN).
CAPREIT is the largest residential REIT in the country, with a highly diversified portfolio of assets across Canada. Minto is significantly smaller, with a market cap of just $535 million compared to CAPREIT’s $7 billion.
For example, Minto owns just over 7,500 suites across 28 properties, with about two-thirds of its portfolio located in either Toronto or Ottawa. CAPREIT, by comparison, owns over 44,000 suites across the country.
Despite the difference in size, though, both stocks have a lot of similarities. They both trade cheaply, offer attractive and sustainable distributions, and have plenty of long-term growth potential.
For example, right now, Minto offers a yield of roughly 3.6%, while CAPREIT’s yield is sitting around 3.5%.
Furthermore, to get an idea of just how cheap they are today, CAPREIT’s forward price-to-adjusted-funds-from-operations (P/AFFO) ratio is just 19.7 times today, compared to its five-year average of 23.6 times. Meanwhile, Minto’s forward P/AFFO ratio is currently 16.5 times, well below its five-year average of 21.9 times.
So, while both these high-quality real estate stocks are cheap, there’s no question they are some of the best Canadian stocks to buy now.
Two of the best long-term REITs in Canada
Although residential REITs are some of the best and most reliable real estate stocks you can buy now and hold for the long haul, that doesn’t mean you can’t find long-term opportunities in retail or industrial REITs as well.
CT REIT (TSX:CRT.UN), for example, is one of the best retail REITs in Canada, thanks to its close relationship with Canadian Tire. Not only is Canadian Tire CT REIT’s largest tenant, accounting for roughly 90% of its rental revenue, it’s also the REIT’s largest shareholder.
As long as Canadian Tire remains the dominant and popular retailer that it is today, CT REIT should continue to perform well. Plus, in addition to its strong fundamentals, CT REIT offers an attractive distribution yielding roughly 6% today and has increased that payout every year since going public.
Furthermore, its forward P/AFFO ratio is currently just 12.7 times, below its five-year average of 13.3 times.
Meanwhile, Granite REIT (TSX:GRT.UN) is one of the top industrial REITs in Canada. It offers strong long-term potential as demand for warehouse space and logistics facilities continues to grow alongside the rapid expansion of e-commerce.
Granite also maintains a reasonable payout ratio and has increased its distribution every year for more than a decade, making it a reliable long-term investment. And today, that yield is sitting at just shy of 5%.
So, if you’ve got cash to put to work and you’re looking for a high-quality opportunity in this environment, Granite is easily one of the best Canadian real estate stocks to buy now and hold for years.
