These 3 Canadian Stocks Could Benefit if Rates Fall Again

Rate cuts don’t have to happen tomorrow for these discounted REITs to start looking attractive again.

Amy Legate-Wolfe

Author Bio Amy became interested in investing in 2018 after having her first daughter. After receiving a masters degree in journalism from Western University, she became frustrated that the finance industry remained a confusing place for Canadians like her: new parents, millennials, and other young people who needed to understand their finances. Now, Amy focuses on tech companies and renewable energy for growth opportunities, coupling that with long-term investing strategies and equities. She also provides investors with a daily newsletter, Canada Stock Digest, for daily market updates. Her work can also be found at Canada's National Observer, where she writes on the business side of climate action. Before joining Motley Fool Canada, Amy wrote for major news organizations including HuffPost, CTVNews.ca, and CBC. When she’s not researching investing strategies, Amy’s time is pretty much monopolized by her two wild daughters, but in what little spare time she has she loves to do yoga, go on walks with her dog, and travel with her husband. Social Media Follow Amy on LinkedIn and Canada Stock Digest. Favorite Investment Quote “October: This is one of the particularly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February.” – Mark Twain

Published May 13, 5:00 pm EDT

| More on: CAR.UNDIR.UNHR.UN

Key Points

CAPREIT owns apartments with near-98% occupancy and rising cash flow, yet trades far below book value.
H&R has shifted away from offices, pays a higher yield, and still looks cheap versus its assets.
Dream Industrial is pricier, but its warehouses stay in demand and could benefit if lower rates boost REIT valuations.

Canada’s interest rate continues to stay steady, not moving below the 2.25% rate it’s been at since October, 2025. Yet there is hope on the horizon that perhaps that interest rate could fall once again.

When interest rates fall, that can completely change investor sentiment. These falls usually benefit real estate investment trusts (REITs), interest-sensitive stocks, companies with large real estate portfolios, and businesses with debt-heavy growth models.

With that in mind, today, we’re going to look for companies that offer benefits through lower rates, but look undervalued today due to recent moves (or lack thereof) by the Bank of Canada.

woman considering the future — Source: Getty Images

CAR

First up, we have Canadian Apartment Properties REIT (TSX:CAR.UN). CAPREIT is one of Canada’s largest residential REITs, with over 46,000 residential suites and sits spanning from Canada to the Netherlands and into Ireland. This gives investors huge apartment demand, which has remained strong due to housing shortages and immigration.

In fact, this showed up in the company’s earnings. Occupancy remained strong near 98%, with strong rent growth continuing in major urban markets. What’s more, the first quarter of 2026 brought in same-property net operating income (NOI) growth, as well as adjusted funds from operations (AFFO) per unit climbing year over year.

Then there’s valuation, with CAPREIT trading at just 0.63 times book value, offering a dividend yield at about 4.5% at writing while shares remain below historical highs. True, slower economic growth and interest rates have kept this stock down. But as rates stabilize, the economy could see even more demand for this top REIT.

HR

Next, we have H&R REIT (TSX:HR.UN), giving investors exposure to residential, industrial, and retail properties. The REIT spent the last several years selling off its office assets, focusing now more on residential and industrial properties. It now boasts a real estate portfolio of about $10 billion.

That repositioning seems to be working for it. During its most recent earnings report, occupancy hit around 96%, with stable same-property NOI growth. What’s more, the stock looks highly valuable even compared to CAPREIT.

At writing, HR trades at just 8.3 times earnings and 0.68 times book value. All while offering up a 5.6% dividend yield. Therefore, you’re getting a huge yield for a great price. And with the company continuing to focus on a strong and expanding portfolio, this looks like one REIT to keep on your interest rate watchlist.

DIR

Finally, we have Dream Industrial REIT (TSX:DIR.UN), one of Canada’s strong industrial REITs. The company boasts a 70-million-square-foot portfolio across Canada, Europe, and the United States. And that’s not looking to shrink any time soon, with industrial properties only increasing in value through e-commerce growth, warehousing demand, and supply-chain modernization.

Again, earnings prove this thesis with occupancy near 97% during its most recent quarter. The stock also boasted strong rental rate growth on renewals, and AFFO continued to grow steadily — all while trading at just 22.5 times earnings, 0.86 times book value, shares up 35%, and a yield at 4.9%!

So, yes, this REIT looks pricier on a valuation standpoint than the others. That said, it also looks more stable. DIR stock offers the growth in industrial properties that the world needs, and that’s not going anywhere. With logistics having such strong demand, near-shoring trends supporting growth, and falling rates potentially reigniting investor demand, it simply looks like a perfect investment these days.

Bottom line

Falling rates could become a huge catalyst for REITs like these three. CAR offers residential stability and demographic growth, HR turnaround and valuation recovery potential, and DIR industrial strength and logistics demand. And all three combined could create massive income, even with $7,000 on hand.