This Canadian REIT Could Be the Safest Income Play on the TSX

Investing in blue-chip REITs such as Killam can help you generate a steady stream of passive income in 2025 and beyond.

Aditya Raghunath

Aditya Raghunath joined the Motley Fool Canada team in 2019 and has close to seven years of experience in covering publicly-listed companies. With a post-graduate degree in finance, Aditya aims to educate and engage Canadians by writing extensively about growth, dividend, and value stocks. If you are considering investing in the stock market, he recommends reading The Intelligent Investor by Benjamin Graham before taking the plunge.

Published October 15, 2025 3:30 pm EDT

Canadians should consider gaining exposure to real estate investment trusts (REITs) to diversify their portfolios and generate a steady stream of income. Typically, REITs own and operate a portfolio of income-generating properties, a portion of which is paid to shareholders via dividends.

In this article, I have identified Killam Apartment REIT (TSX: KMP.UN) as one of the safest income plays on the TSX. Let’s see why.

Concept of rent, search, purchase real estate, REIT — Source: Getty Images

Is this Canadian REIT a good buy?

Valued at a market cap of $2.2 billion, Killam Apartment is one of Canada’s largest residential real estate investment trusts, managing a $5.5 billion portfolio of apartments and manufactured home communities.

Based in Halifax, Killam operates primarily across Atlantic Canada, Ontario, and Western Canada. Killam generates revenue through rental income from its diverse property mix, which includes urban and suburban apartments, manufactured home sites, and commercial spaces.

The REIT focuses on three strategic priorities: maximizing earnings from existing properties, expanding through accretive acquisitions while disposing of non-core assets, and developing high-quality properties in core markets.

In the last 10 years, Killam Apartment stock has returned more than 160% to shareholders after adjusting for dividend reinvestments. Despite these steady returns, the REIT offers you a tasty dividend yield of 4.1%.

Killam Apartment REIT delivered solid Q2 results as it reported funds from operations of $0.32 per share, an increase of 6.7% year over year. The Halifax-based landlord achieved 6.7% same-property net operating income growth across its portfolio, which indicates resilience even as some Canadian rental markets show signs of cooling.

The company’s apartment occupancy remained strong at 97.5%, slightly below the 97.8% posted a year earlier. Revenue growth reached 6% on a same-property basis, driven by a 13% average rental lift on unit turnovers and a 3.7% increase on lease renewals. Management expects to hit its 5% to 6% revenue growth target for the full year.

Atlantic Canada continues to outperform, while New Brunswick and Nova Scotia are leading the way in occupancy, rental growth, and net operating income expansion. These markets benefit from Killam’s diversified portfolio offering competitive and affordable rental alternatives.

Halifax and Kitchener-Waterloo show the strongest mark-to-market spreads at over 20%, though the company-wide spread has compressed to 13% as asking rents have declined slightly.

During Q2, the company sold 446 units in Newfoundland and PEI for $34.4 million. A major sale of 521 units in PEI for $81.9 million is expected to close shortly, effectively completing the company’s PEI apartment disposition program. These sales are being recycled into higher-quality assets.

In July, Killam acquired 114 units in Fredericton for $28.7 million and purchased the remaining 50% stake in three Ottawa buildings from RioCan for $136 million. The company also completed The Carrick, its first all-electric building in Halifax, which is already 60% leased.

Operating expenses increased 4.5% in Q2, with property taxes up 5% as the main pressure point. However, utility costs moderated to just 3.2% growth as carbon tax removal benefits started flowing through.

The balance sheet continues to strengthen, given that debt as a percentage of total assets fell to 39.6%, the sixth consecutive quarter of debt reduction. Killam also increased its Canada Mortgage Housing Corp-insured mortgage ratio to 81.5% from 75% a year ago, accessing lower-cost financing.

Is this REIT undervalued?

Analysts tracking the REIT forecast revenue to increase from $364.7 million in 2024 to $413 million in 2027. In this period, adjusted funds flow from operations is estimated to increase from $0.99 per share to $1.20 per share.

Killam REIT is on track to pay shareholders an annual dividend of $0.72 per share, which translates to a payout ratio of less than 70%, which is sustainable.

Bay Street projects the annual dividend payout for Killam REIT to increase to $0.78 per share in 2027, up from $0.62 per share in 2017.