When it comes to high-yielding securities with a lower correlation to the broad stock market, you really don’t have to look far, especially if you’re willing to explore opportunities to be had in the Canadian REIT (Real Estate Investment Trust) scene.
Undoubtedly, the Canadian REITs are a great place to get a passive income boost without having to embrace more elevated volatility. Indeed, it’s nice that the REITs are higher-yielding by design, given the distribution payout requirements. And while such requirements could hold back growth potential, I do think that the combination of lower interest rates and improving economic conditions could make the big REITs worthy of a second look.
Given that dividend yields have come down, at least on average, across the equity space, I’d say the case for picking up the shares of a REIT could get that much stronger in this new year. While it could be as easy as going for a low-cost Canadian REIT ETF, I’d argue that it makes more sense to go with an individual name, preferably with a higher yield and occupancy rates that are still on the high end.
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SmartCentres REIT: A high-yielding REIT worth looking at closely in 2026
When it comes to the retail REITs, I think there’s ample opportunity to get a big income stream for a relatively low price. Consider shares of SmartCentres REIT (TSX: SRU.UN), which yield around 7.2% at the time of this writing. The strip mall REIT, which has expanded its footprint into residential real estate, stands out as worth checking out right here. Year to date, shares are up just 5%, dragging far behind the TSX Index despite the progress it made in 2025.
Undoubtedly, the REIT has one of the highest occupancy rates in the retail REIT scene, sitting just shy of 99%. As the retail REIT expands its footprint into the lucrative self-storage market, I do see the potential for adjusted funds from operations (AFFOs) to grow at a steady pace over the next five years.
Given its foray into self-storage and the mixed-use properties (think residential-retail properties in urban areas), I see the potential for a re-rating at some point down the line. Sure, SmartCentres REIT remains a retail REIT at its core, but it’s quickly becoming a more diversified REIT and one that might be able to deliver consistent distribution raises over the next decade or so.
It will be interesting to see how the firm can trim away at the debt on its balance sheet. Undoubtedly, with numerous ambitious properties coming online in 2026, there’s going to be more cash flow streams that could allow even greater financial flexibility. Either way, the 7.2% yield seems way too low right now, given the year-ahead catalysts and the likelihood that the Bank of Canada will keep interest rates a bit lower for longer.
Could 2026 be the year when SmartCentres REIT catches up?
Perhaps. Either way, I view the yield as safe, steady, with longer-term growth potential. And in 2026, I do think more income hunters will gravitate towards the name, especially if higher yields (especially above 6%) become scarcer.
