Is this the beginning of a Canadian real estate crash? That’s the question on the minds of many investors as housing prices across the country show signs of weakness. Higher interest rates have cooled the market, and demand is shifting. Mortgage approvals are down, rents are rising more slowly than inflation, and builders are hitting pause on new developments. But just like with any downturn, there’s opportunity for investors who look closely. Two dividend stocks worth considering right now are First National Financial (TSX:FN) and Canadian Apartment Properties REIT (TSX:CAR.UN). Let’s get into why.
First National
First National is one of the country’s largest non-bank mortgage lenders. It works with brokers and borrowers across Canada and has grown steadily since it was founded in 1988. The dividend stock funds both residential and commercial mortgages and has a reputation for strong service and efficient underwriting. Even if the housing market continues to cool, people will still need mortgages. First National’s model, which avoids risky subprime lending, could help it stay resilient through the cycle.
In its most recent earnings report, First National reported revenue of $190 million, which was below estimates of $206 million. Net income dropped sharply to $24.6 million compared to $63 million in the previous quarter. Still, the company remained profitable and continued to generate strong cash flow. It posted a trailing 12-month revenue figure of $651 million and net income of $174 million, with a profit margin of around 27%. While mortgage originations may have slowed, the dividend stock is still maintaining a high return on equity and strong long-term fundamentals.
Shares have dipped alongside the real estate sector, which could give investors a buying opportunity. The price-to-earnings ratio is slightly below the financial sector average. Plus, First National pays a solid 6% dividend yield at writing. For investors seeking exposure to Canada’s mortgage market with less risk than direct real estate ownership, this could be an appealing entry point.
CAPREIT
The second dividend stock to watch is Canadian Apartment Properties REIT. This is one of the largest residential landlords in Canada, with more than 67,000 rental units in its portfolio. It focuses primarily on apartments but also includes townhomes and manufactured housing across Canada, Ireland, and the Netherlands. It’s a defensive pick in uncertain times, since people always need a place to live.
CAPREIT has weathered market turbulence better than many other REITs. In its most recent quarter, it reported revenue of $253 million and net income of $8 million. Full-year results showed $1.11 billion in revenue and $293 million in net income. The REIT pays a monthly distribution of $0.13 per unit, offering a yield of approximately 3.4% at writing. That income stream is appealing for investors looking to generate passive cash flow in a rocky market.
Importantly, CAPREIT is managing its debt well. Its total assets sit around $15.6 billion, with liabilities dropping to $6.55 billion. That suggests a strong financial position and the ability to absorb short-term pressure. If rents hold steady or increase in a tight market, the REIT could see earnings continue to grow. The dividend stock also benefits from geographic diversification, which can help offset regional softness in home prices or rental demand.
Bottom line
Of course, both dividend stocks carry risk. If home prices fall significantly or mortgage defaults rise, First National could see earnings come under pressure. If unemployment increases or rent control intensifies, CAPREIT could face challenges keeping margins intact. But both businesses are built on long-term needs: mortgages and housing. That gives them an edge in surviving a slowdown and coming out stronger on the other side.
So, is this the start of a real estate crash? Maybe. Or maybe it’s a much-needed correction after years of soaring prices. Either way, these two dividend stocks offer a way to invest in the sector without betting the farm. If the dip continues, investors who focus on fundamentals may be the ones who end up ahead.
