The Canadian REIT space still looks to be a place to get some yield on the cheap. Of course, as the Bank of Canada considers its next move after its pause (will it be a hike or a cut?), I do think that a bit more choppiness should be the expectation when it comes to the names, including the ones that have been firing on all cylinders of late. Of course, the 2022 market drop was rather unkind to the Canadian REITs. And while many of them try to get back to where they were, I do think that the road higher could continue to be less steep and, of course, full of bumps.
For investors looking for something that’s farther away from the tech, AI, and semi trade, though, I think the REIT still stands out as one of the better places to get paid a nice distribution while you wait. Of course, added rate sensitivity is never ideal, but if you’re seeking a durable source of passive income for the long run, some of the premier names within the REIT scene still stand out as great buys.
Of course, timing the peak in the semi trade is a really hard thing to do. Perhaps some newer investors think the trade has more legs, but I would be concerned over the parabolic action we’ve witnessed of late, especially as the semi strength clashes with one of the hottest tech IPO seasons in recent memory.
Without further ado, consider shares of CT REIT (TSX: REI.UN), which boast a yield of 5.5%. I think the 5.5% area is the Goldilocks zone for the REITs right now, especially as shares look to power back to prior multi-year highs. With this name, you’re getting a good amount of strength and a yield that’s far better than what the market can currently provide.
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CT REIT
Shares of CT REIT have done quite well so far this year, with the stock now up just shy of 8% year to date. The steady name might depend a great deal on Canadian Tire (TSX: CTC.A), but, in my view, that’s a good thing since the retailer has a robust balance sheet and has really resonated with Canadian consumers in recent years. Of course, time will tell if the “buy Canadian” attitude has staying power.
While I’m a fan of Canadian Tire, the retailer, I must say that I like CT REIT much better, and it’s about more than just the yield. At the end of the day, shares of Canadian Tire actually sport a pretty nice yield, currently hovering around 4.2%. When it comes to stability, though, I think CT REIT is a less dramatic way to go. If you’d rather own the real estate rather than the retailer while getting a lower beta (0.84 right now) and an extra percentage point and more yield, CT REIT is worthy of a buy.
As Canadian Tire stock takes a dive after a tough quarter, while CT REIT shares keep gaining, I think the better bet for a wobbly economy is clear.
