You don’t need to overleverage yourself by buying a rental property and spending your time chasing tenants, fixing toilets, or covering mortgage payments. TSX-listed real estate investment trusts (REITs) give you exposure with none of the hands-on hassle, while paying out attractive yields with monthly dividends.
A REIT is a company that owns and operates income-producing properties, from apartments to shopping centres to warehouses. Most of their earnings must be paid out to unitholders, which is why REITs tend to offer reliable monthly payouts. Those payouts aren’t considered eligible dividends, though, so they’re best held in registered accounts like a Tax-Free Savings Account (TFSA).
The TSX REIT universe is broad, and if you prefer instant diversification, a REIT exchange-traded fund (ETF) can get you there in one trade. But if you’d rather stock pick, I’ve highlighted three quality REITs and will walk you through the key metrics beginners should focus on when evaluating them.
Residential REIT
Canadian Apartment Properties REIT (TSX:CAR.UN), better known as CAPREIT, is the largest residential REIT in the country. It owns and operates a broad mix of rental apartments, townhomes, and manufactured housing communities across Canada. The structural drivers for its demand are clear: urbanization, immigration, and the ongoing affordability gap between renting and buying homes.
CAPREIT currently pays a $0.1292 monthly distribution, which works out to a 3.73% yield. The payout is sustainable, with a distribution ratio of 61% of adjusted funds from operations (AFFO). This means only a portion of cash flow is returned to investors, leaving room to reinvest in properties or reduce debt. Over the past three years, the payout has grown at a 5.4% annualized rate.
Financially, CAPREIT is in good shape. Its debt-to-assets ratio sits at 38.7%, a low level for a REIT that signals balance sheet flexibility and manageable leverage. Occupancy in the latest quarter was 97.9% and has remained consistently high. Investors generally want to see rates above 95%, as it indicates stable rental demand and supports predictable cash flow.
Industrial REIT
Granite REIT (TSX:GRT.UN) is one of Canada’s leading industrial-focused REITs, with a portfolio that includes logistics, warehouses, and manufacturing facilities. These properties are in high demand thanks to the continued growth of e-commerce, supply chain modernization, and the need for large-scale distribution centers close to urban hubs.
Granite pays a $0.2833 monthly distribution, equal to a 4.46% annualized yield. Over the past three years, its dividend has grown at a 2.8% compound annual growth rate. The payout ratio sits at 66.5% of AFFO, leaving a comfortable margin to sustain and grow the distribution.
On the operating side, occupancy is currently 95.8%. That’s dipped since 2022, partly due to tariffs and trade pressures weighing on some tenants, but still reflects strong demand for industrial space. Granite also maintains a relatively low 34.9% debt-to-assets ratio, a sign of conservative leverage and solid financial health.
Retail REIT
Retail REITs aren’t usually my first pick, given the pressures facing the Canadian consumer, but Choice Properties REIT (TSX:CHP.UN) is an exception. It owns a portfolio of properties anchored by essential retailers, most notably grocery chains like Loblaws. That makes its demand drivers more resilient, since groceries are a staple even when discretionary spending slows.
Choice pays a $0.0642 monthly distribution, which works out to a 5.16% yield. Dividend growth has been modest at just 1.6% over the past three years, and the payout ratio is a relatively high 88.5% of AFFO. That suggests the distribution may be getting stretched, so it’s worth keeping an eye on coverage going forward.
Operationally, the REIT is solid. Occupancy sits at 97.8%, which is no surprise given the essential nature of its tenants. The main caveat is concentration risk, with 64.7% of its space leased to Loblaws, making it heavily reliant on a single tenant. The good news is that leverage remains conservative, with a debt-to-assets ratio of 37.4%.
