The Canadian REIT (real estate investment trust) scene is a great place to look if you want passive income at a reasonable price. Indeed, as hopes for lower interest rates from the Bank of Canada (BoC) grow, the underappreciated REIT scene could be a source of pretty good results over the long run.
And while the REIT scene could continue to be volatile moving forward, I do think that their steady distributions make them worthy semi-permanent holdings in any TFSA (Tax-Free Savings Account) or RRSP (Registered Retirement Savings Plan). Of course, the TFSA ought to be a top choice for investors who haven’t yet maxed out their contributions. Indeed, when you take taxation out of the equation, you’ll be able to keep every bit of those juicy distributions.
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CT REIT: A buy-and-hold forever kind of passive-income play
In any case, this piece will examine a magnificent REIT that’s fresh off another distribution hike.
It’s a steady, albeit under-diversified REIT in the retail scene that I think is one of the gold standards of Canadian REITs. Enter shares of CT REIT (TSX: CRT.UN), a retail REIT, that boasts a distribution yield that’s just a few basis points shy of 6%, at least at the time of this writing. If shares dip a bit, there’s a good chance that the yield is back above the 6% mark. In any case, shares of the exceptional retail REIT are up 22% since the June lows of last year.
And with a sudden spring-summer surge in the books, I think the name is worth considering if you’re looking for a passive-income source that won’t keep you up at night.
Of course, CRT.UN shares aren’t free from risk or volatility. Shares have been somewhat choppy in recent years due to rates. In any case, with a 0.85 beta, shares are a less correlated way to give big (and safe) passive income without having to feel the worst of the next big market sell-off in stocks (think a valuation correction that some pundits think the S&P is overdue for).
CT REIT: The distribution is growing steadily!
Despite the impressive size of the distribution, CT REIT looks poised to keep increasing the payout at a modest (low to mid-single-digit rate) annually. Indeed, with an ambitious plan to retrofit existing Canadian Tire locations, I think the REIT, which has one of the stable (and growthiest) distributions around, is a fantastic way to bet on the real estate that houses many Canadian Tire locations. Indeed, I’m a huge fan of the iconic retailer, but I’m an even bigger fan of the REIT that stands in its corner.
The REIT has an enviable 99% occupancy rate, thanks in large part to having Canadian Tire as its largest tenant, contributing to more than 90% of the rental income. As Canadian Tire expands its reach, CT REIT will have the option to take a front-row seat.
In short, CT REIT’s 6% yield is arguably one of the best-covered of all the 6%-yielders out there. And unlike most other high-yielders in the market, its hefty payout doesn’t detract from its distribution growth profile, thanks to its ties with a more than 100-year-old retail powerhouse.
In short, CT REIT is a more bountiful way to bet on the strength of Canadian Tire without having to experience added volatility from sudden shifts in consumer behaviour. Indeed, consumer stocks tend to be a choppy ride during times like these. However, CT REIT is a more insulated way to ride out such waves with far less worry.
