Finding a Canadian dividend stock that pays reliable monthly income is like discovering a tap that drips cash. Canadian real estate investment trusts (REITs) are naturally built for this purpose. But when a REIT yields 8.4% and trades at a 40% discount to its net asset value (NAV), it’s only natural to ask: What’s the catch?
Let’s dig into Nexus Industrial REIT (TSX:NXR.UN), a high-yield dividend investment that has passive income hunters buzzing and value seekers scratching their heads in 2026.
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A monthly dividend payer with an 8.4% yield
Nexus Industrial REIT owns 89 commercial properties spanning 12.9 million square feet of gross leasable area. Only one property sits in development; the other 88 are actively collecting rent, every month.
By regulation, REITs must distribute roughly 90% of taxable income to unitholders to maintain their tax-exempt status. To avoid a lumpy year-end payout, trustees elect to distribute rental income monthly. That makes REITs like Nexus a natural fit for investors seeking regular monthly passive income streams they can count on.
The trust completed its transformation into a pure‑play industrial REIT in 2025 after shedding retail assets and an office property for $71.3 million. Five development projects finished during the 18 months to November 2025 are now contributing to the top line. Today, Nexus Industrial REIT’s distributions yield 8.4% paid monthly — a tempting proposition in any stock market.
Is the Canadian REIT’s juicy yield safe?
Here’s where Nexus Industrial REIT’s yield offering gets complicated.
The REIT’s normalized adjusted funds from operations (AFFO) payout ratio landed at 104% over the first nine months of 2025. That means the trust paid out more in distributions than it generated in sustainable distributable cash flow. During the third quarter, that figure spiked to 107.1%.
Any payout ratio above 100% is a yellow flag. But management insists the current distributions are sustainable, and the numbers show modest improvement. The 104% reading compares favourably to 109.1% during the same period in 2024.
What gives management confidence? It’s strong leasing activity. During the third quarter of 2025, Nexus completed lease renewals at a 13% spread to expiring rents and leased new space at a staggering 60% mark‑to‑market uplift. Industrial occupancy climbed 100 basis points to 96%, with room to improve in 2026.
The trust has 765,000 square feet expiring this year, half of which comes due during the first nine months. Crucially, tenants are already lined up for 90% of that space. Embedded rent steps and positive renewal spreads should gradually lift net operating income and, by extension, AFFO.
Add a pending investment‑grade credit rating (targeted for late 2026) that could lower interest costs, and the path to a sub‑100% payout ratio becomes visible, if not guaranteed.
Why the industrial REIT trades at a 40% discount
Nexus units recently changed hands at $7.70, yet the most recent net asset value (NAV) per unit stood at $12.98. That’s a 40% discount to the appraised fair value.
In normal conditions, such a wide discount signals deep distress. But NAV is a snapshot of property values minus debt; it isn’t the same as liquidation value. Market sentiment, particularly toward interest‑sensitive assets, have hammered REIT multiples since 2022. Nexus carries floating‑rate exposure, amplifying the pain while AFFO payout rates ranged in dangerous territory.
Investors are effectively pricing in a permanent impairment that the underlying fundamentals don’t seem to support. Industrial real estate remains healthy, occupancy is high, and rent spreads are positive as lease renewals trickle in in 2026. An investment-grade credit rating this year could be a valuation catalyst to the upside.
The Foolish bottom line
Nexus Industrial REIT isn’t a set‑it‑and‑forget‑it holding yet. An AFFO payout ratio north of 100% demands respect, and distribution cuts remain a non‑zero risk. Yet management’s confidence, backed by visible leasing momentum, a clear organic growth runway, and a credible path to investment‑grade status, suggests the 8.4% yield is more durable than the payout ratio alone implies.
For income investors willing to tolerate some volatility and a watchful eye on quarterly AFFO, the 40% NAV discount offers a genuine margin of safety. If you are seeking high monthly income and can handle above-average volatility, NXR.UN deserves a spot on your watchlist – or even a small starter position.
