Like clockwork, on or around the 15th of every month, Nexus Industrial Real Estate Investment Trust (TSX:NXR.UN) sends $0.053 per unit as monthly income distributions straight to unitholders’ accounts. It has been doing that for more than 12 consecutive years — a remarkably consistent schedule that income-oriented investors can practically set their watches to. For new Nexus Industrial REIT buyers today, that monthly payout works out to a juicy 7.9% annual yield. Stash it inside a Tax-Free Savings Account (TFSA), and you get to keep every penny tax-free.
Nexus hasn’t always paid this much in monthly distributions. Back in 2014, the monthly distribution was a smaller $0.013 per unit. That jumped to the current $0.053 in February 2021 after the REIT consolidated units in a 1-fo-4 reverse stock split as it grew its industrial portfolio and strengthened its distributable cash flow base. Management was signalling a change in operational strategy in the underlying business as it began a strategic change from a diversified property owner towards becoming a pure-play industrial REIT.
The portfolio restructuring strategy has worked, and Nexus Industrial REIT’s monthly distributions appear attractive and more secure going forward.
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Nexus Industrial REIT closes a game-changing debt deal
Fast-forward to this month, and Nexus Industrial REIT just gave its balance sheet another major upgrade. In April, it closed a $500 million private placement of unsecured debentures – its first ever – with two tranches pricing at 4.2% and 4.6%, maturing in 2029 and 2031, respectively.
The new financing has real-world impact. Before this deal, the REIT had about $733 million in bank credit facilities with interest rates as high as 5.3%. After recently graduating to an investment-grade credit rating (BBB low from Morningstar DBRS), Nexus can now tap the unsecured debt market for cheaper capital.
The trust plans to use the proceeds to pay down pricier loans, which will shave meaningful interest costs going forward. Less interest expense means more distributable cash flow, and that directly supports the trusty monthly distribution.
But can the portfolio actually sustain a 7.9% yield?
It’s a fair question. A payout north of 100% of adjusted funds from operations (AFFO) is usually a red flag. In 2024, Nexus’s AFFO payout ratio sat at an uncomfortable 111.7%. The good news? That improved to 103.2% in 2025, and management has guided for a normalized AFFO payout ratio below 100% in 2026.
Several tailwinds are lining up. The recent refinancing will lower interest costs. The industrial portfolio, comprised of 89 properties with 12.4 million square feet, 96% occupied at year-end, is of high quality and still has an estimated 18.7% mark-to-market rent upside. That means as leases roll, rents could march higher without a single new building. Management also added two industrial properties in late 2025, growing net operating income by 2.8% for the year.
To be clear, no distribution is guaranteed. But with cheaper debt reducing financing cost pressure and an embedded rent-growth runway adding new net operating income, the REIT’s 7.9% yield is looking a lot more sustainable than it did a year ago.
A 39% discount on a TFSA income investor’s best friend
Nexus Industrial REIT’s monthly distributions typically contain a large return of capital (ROC) component – 80% in 2025, with the rest mostly capital gains. In a non-registered account, ROC lowers your immediate tax bill every year, but creates headaches tracking your adjusted cost base. Inside a TFSA, you ignore all that noise. Every $0.053 per unit monthly dividend lands in your pocket cleanly, with no tax slips to worry about.
The REIT is scheduled to report first-quarter earnings on May 12, before markets open. Foolish investors watching for an early AFFO improvement in 2026 will want to circle that date, and to check out the trust’s net asset value per unit.
NXR.UN units have a net asset value (NAV) of $13.22 going into 2026. At writing, units traded at a 39% discount to this fair value measure. They could be grossly undervalued.
A 7.9% yield with monthly cash, an improving balance sheet, no tax complications, and a 39% discount is a great combination worth a serious look.
