Why This Canadian REIT Could Be a Buy-and-Hold Forever Stock

If you want long-term income, this dividend stock can be your prime option.

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Key Points
  • Canadian residential REITs suit long-term holding: steady housing demand, inflation-linked rents/values, and dividends can compound in TFSAs/RRSPs.
  • CAPREIT trades well below its asset value and is buying back units, shifting to core Canadian buildings with cheaper, long-term mortgages.
  • Operational strength supports income: 98.3% occupancy, 5% NOI growth, and a well-covered ~3.7% yield offer steady passive income with room to grow.

Canadian real estate investment trusts (REIT) are some of the best options for investors when it comes to seeking passive income. While that passive income through dividends is an enticing income booster, you should also ask whether these stocks are long-term holds. In the case of a REIT we’re looking at today, the answer is a solid, “yes.”

First, however, let’s look at why some Canadian REITs are better than others when it comes to solid long-term buys.

A woman stands on an apartment balcony in a city

Source: Getty Images

REITs: A forever investment?

When it comes to whether or not REITs can be a buy-and-hold forever stock, there are a few points to consider. First off, investors need to consider whether they serve an essential demand base. Residential REITs own apartments and housing, and these remain in demand regardless of economic cycles, for example. Meanwhile, office and retail properties can drop in demand depending on the cycle.

Canada’s ongoing housing shortage and population growth from immigration are other reasons why apartments and residential REITs can be a solid option. In fact, apartment demand has had structural support for decades. What’s more, REITs are meant to distribute most of their cash to unitholders, usually in the form of dividends. Healthy payouts can allow you to count on consistent, covered distributions. And that can increase further as rent rises.

Then there are macro reasons. Real estate values and rents tend to rise with inflation, protecting your purchase. What’s more, when held in a Tax-Free Savings Account (TFSA) or Registered Retirement Savings Plan (RRSP), distributions can compound tax-free! Thus creating the perfect “set it and forget it” plan.

Consider CAPREIT

Amongst the REITs out there, Canadian Apartment Properties REIT (TSX: CAR.UN) provides a strong opportunity. Right now, shares trade at about $42, which is far below its net asset value of $56 per unit, providing a major discount. And management believes in its value, repurchasing about $187 million worth of units in the first half of 2025.

What’s more, the dividend stock is pivoting its focus to more profit. It recently exited Europe and sold non-core Canadian properties, bringing in $274 million so far in 2025. Meanwhile, it’s focusing on core Canadian markets, spending $214 million. Many of these purchases were in low-cost, long-term mortgages to improve cash flow predictability.

And amidst all this change, the stock maintains a 98.3% occupancy rate, with net operating income rising 5% year-over-year. Now, with a dividend yield of about 3.7% as of writing, the stock has a lot of room to grow while still offering passive income. With dividends well-covered and growth from acquisitions underway, the REIT is set up to quietly compound for patient investors. In fact, right now the dividend stock could bring in $257 from a $7,000 investment each year!

COMPANYRECENT PRICENUMBER OF SHARESDIVIDENDTOTAL PAYOUTFREQUENCYTOTAL INVESTMENT
CAR.UN$41.76168$1.53$257Monthly$7,018

Bottom line

CAPREIT stock is a solid opportunity for investors looking to create passive income – not just in the near term, but far into the future. Retail and office REITs don’t have anything on this top residential stock, especially as it pivots towards more cash flow and less volatility. So if you want dividends and growth, this is a dividend stock to consider.

Fool contributor Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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