Overall, rising rents aren’t necessarily a good thing – at all. Yet if you’re investing, they can be a way to take back some of that rental income you might have lost. That’s why today, we’re going to look at a way to bring back the cash from rising rents by looking at three Canadian real estate investment trusts (REIT). They can not only expect to remain stable during rising rents, but could actually see a boost in share price.
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DIR
First, let’s look at Dream Industrial Real Estate Investment Trust (TSX: DIR.UN). This REIT focuses on industrial properties, so the warehouses and assembly lines that are in high demand right now driven by growth in e-commerce. And that demand has been seen over and over again, with DIR recently reporting a rental spread of 38.5% upon lease renewals.
Furthermore, rising rents offer the potential to continue this trend, increasing cash flow and the dividend stock’s overall income. What’s more, its current occupancy rate of 96%, showing the trust is well-positioned to capitalize on rising rents and minimal vacancy. Increased rents also mean growth in funds from operations (FFO) and net operating income (NOI). This boosts investor returns for DIR. Overall, its effective management and strategic acquisitions strengthen this dividend stock beyond compare.
BEI
Another option could be Boardwalk REIT (TSX: BEI.UN). This dividend stock operates primarily in regions like Alberta, where the population is growing, thus driving rental demand. Rising rents in these areas can once again help lead to improved NOI and FFO metrics.
And this dividend stock is already doing quite well, with its occupancy at about 98% as of writing! It can thereby swiftly implement rent increases and bring in higher income and profitability. These higher rents would then contribute to revenue growth, enhancing the dividend stock’s financial performance distributions through dividends and buybacks. And as older leases renew at higher market rents, Boardwalk will continue to capture more value without increases in overhead.
CHP
Finally, we have Choice Properties REIT (TSX: CHP.UN), which is in the essential area of grocery retail. CHP benefits from this necessity-based portfolio, which includes Loblaw as its main tenant. The grocery and logistics tenants are thereby less sensitive to economic fluctuations. So rising rents in these areas can boost already stable revenue streams.
What’s more, CHP operates in high-demand areas, so increasing rents can substantially enhance value and cash returns. As those rents rise, CHP can expect an increase in FFO, aiding in offsetting other financial pressures such as debt. All while looking for further opportunities to enhance long-term value.
Bottom line
So let’s say you want to create some cash flow to offset your own rising rents. Investors can look forward to monthly income from these dividend stocks, allowing you to put it straight towards your rent if you want, and even make more! If you had $21,000 to invest, that’s $7,000 towards each stock. Here’s what that might look like.
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY | TOTAL INVESTMENT |
|---|---|---|---|---|---|---|
| DIR.UN | $12.62 | 555 | $0.70 | $389 | Monthly | $6,999 |
| BEI.UN | $71.41 | 98 | $1.62 | $159 | Monthly | $6,999 |
| CHP.UN | $14.77 | 474 | $0.77 | $365 | Monthly | $7,002 |
These three REITs are therefore a strong start for those worried about rising rents. You can not only make any lost cash back, you can look forward to growth as well. Both in returns and income, and for years if not decades to come.
