The Bank of Canada announced a 0.25% cut in its key interest rate on September 17, 2025. This move is a relief for homeowners and welcome news for prospective homebuyers. BOC Governor Tiff Macklem said the rate reduction to 2.5% was appropriate to better balance the risks going forward.
On the investment front, the real estate sector has held steady in the last 12 months, prior to the September rate cut. A pair of real estate investment trusts (REITs) has captured the attention of income-focused investors due to their strong performance and high yields. Both real estate stocks also pay monthly dividends.
Diversified portfolio
H&R REIT (TSX:HR.UN) is among the sector’s top-performers thus far in 2025. At $12.05 per share, the year-to-date gain is 34.9%-plus, while the dividend offer is 4.9%. The portfolio of this $3.2 billion REIT investing in Canada and the U.S. consists of office (16), retail (257), residential (26), and industrial (66) properties.
In the first half of 2025, net operating income (NOI) decreased 5% year-over-year to $226.8 million. At the end of Q2 2025, the average occupancy rate and remaining lease term were 93% and 6.4 years, respectively. Meanwhile, H&R is implementing a repositioning plan.
The REIT’s primary objective is to transform and become the leading owner, operator, and developer of multi-residential and industrial properties. H&R is preparing to exit and dispose of its retail and office properties.
The proceeds from the sale (approximately $3.4 billion) will be reinvested to grow the Class A multi-residential and industrial property portfolio. Attractive development and redevelopment opportunities in the Greater Toronto Area, as well as in the U.S. Sunbelt and Gateway cities, will drive future growth.
H&R wants a simplified, growth-oriented business. The focus on residential and industrial properties aims to create sustainable long-term value for unitholders.
Niche play
Automotive Properties’ (TSX:APR.UN) rental business focuses on Canada’s automotive and OEM dealership and service industry. This $1.1 billion REIT owns 80 income-producing automotive properties. The tenants are automotive dealers catering to the mass market and sellers of high-end, luxury vehicles.
In the first six months of 2025, NOI increased 3.5% year-over-year to $41 million, although net income declined 67.6% to $18.9 million from a year ago. Nonetheless, the REIT is well-positioned to organically increase cash flow due to the strong fundamentals of the Canadian automotive retail industry.
Most property leases are triple-net leases. Tenants are responsible for all non-structural capital improvements and all associated costs, including repairs, maintenance, real estate taxes, property insurance, and utilities. As of June 30, 2025, the weighted average lease term of the REIT’s portfolio is approximately 8.5 years. The fixed or Consumer Price Index-linked rent escalators assure consistent revenue growth.
Its CEO, Milton Lamb, said, “We continue to advance our strategy of acquiring properties in growing metropolitan markets and enhancing our tenant and geographic diversification.”
For the benefit of prospective investors, Automotive Properties has paid cash dividends every month since 2015. As of this writing, APR.UN trades at $11.50 per share (+11% year-to-date) and pays a hefty 7% dividend.
For monthly income seekers
H&R and Automotive Properties are viable options for monthly dividend investors. The REITs are also the best alternatives to owning investment or rental properties, minus the headaches of a landlord.
