There are some pretty stellar REITs (Real Estate Investment Trusts) out there that passive income investors may wish to get behind as they look poised to sustain recent gains. Indeed, it has been tough to be a REIT investor over these past few years. Even if you were paid a handsome distribution to wait, the wild waves of faltering rallies have made it tough to keep pace with the TSX Index.
Where others see dead money, though, others see an opportunity to snag a deep-value bargain. And while deep-value investing isn’t for everyone, I do think the following REITs have yields that are generous enough to warrant sticking around. So, if you’ve got an appetite for passive income and aren’t expecting all too much in the way of capital appreciation, the following pair of REITs could be worth casting a line in the water this summer.
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CT REIT
CT REIT (TSX: CRT.UN) still has a nice yield of 6% despite gaining an impressive 21% in the past year. Undoubtedly, the retail REIT isn’t the most diversified in the world, but it’s still a fantastic way to play the powerful balance sheet of Canadian Tire. I’ve said it before, and I’ll say it again: I’d much rather own a REIT behind one wonderful, incredibly liquid business with a rich history than a diversified portfolio of mediocre and subpar tenants, some of which may not have the best credit rating in the world. Either way, CRT.UN shares have been quick to surge in recent months, and I don’t think the REIT’s hot run is close to being over.
The REIT is on a pretty impressive distribution growth streak. And as long as the payout ratio stays in a good spot, I expect the streak to continue on for years to come. With a sky-high occupancy rate and such close ties to the iconic Canadian Tire, I’d look to consider picking up a few shares anytime they fly south.
Add the likelihood of lower interest rates into the equation and CRT.UN shares really do stand out as a core REIT to stash away in a passive income portfolio for the extremely long haul. As an added bonus, the 0.85 beta makes for a slightly less correlated ride than your average TSX stock.
SmartCentres REIT
SmartCentres REIT (TSX: SRU.UN) is another fairly cheap REIT that could be worth buying more of on the way up. Like CT REIT, SmartCentres has unique ties to a powerful, liquid retailer with most locations anchored by a Walmart.
Though it doesn’t have as much reliance on one single retailer (Walmart for Smart, Canadian Tire for CT REIT), I continue to view Smart’s top foot-traffic-driving tenant as a huge source of an economic moat. With a huge 7.3% yield and a good amount of past-year momentum (shares up 17% in the past year), I’d be inclined to add a few shares of strip mall REIT to the shopping list this summer. Perhaps it has one of the best-looking yields north of 7% right now.
