One of the most common mistakes investors make after identifying a high-quality TSX stock trading cheaply is that they try to wait for everything to look perfect before pulling the trigger.
They wait for sentiment to improve, for headlines to turn positive, and for the business to feel safe again. However, by the time that happens, a lot of the opportunity is usually already gone.
Because in reality, many of the best long-term investments don’t look particularly attractive when they first become opportunities. But that’s exactly what creates the opportunity: buying stocks out of favour.
That’s why the smartest investors are constantly looking for high-quality businesses to buy when sentiment is weak and valuations are more reasonable.
And right now, there’s no question that one of the best TSX stocks long-term investors can buy today is Canadian Apartment Properties REIT (TSX: CAR.UN).
CAPREIT is the largest residential REIT in Canada, with a diversified portfolio of apartment properties across the country.
That means that it operates in a segment of real estate that benefits from long-term housing demand, which is why it’s a business you can comfortably buy and hold for the long haul.
Yet despite its defensiveness and the consistent income it generates, the stock has been under pressure over the last couple of years and continues to trade cheaply even as macroeconomic conditions have started to improve.
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Why CAPREIT still looks attractive for long-term investors
The recent pressure on CAPREIT’s stock was never a collapse in the business itself. Instead, it’s largely been driven by the broader environment.
Higher interest rates have weighed on REIT valuations, borrowing costs have increased, and many investors have rotated away from rate-sensitive sectors like real estate. That’s led to weaker sentiment across the entire space.
And when macroeconomic conditions shift like that, even high-quality businesses can get caught in the sell-off and see their valuation multiples compress. But that’s where the long-term perspective becomes important.
Because while the TSX stock has struggled, the underlying business is still intact.
CAPREIT still owns a large, diversified portfolio of residential properties, and that type of real estate is one of the most defensive assets you can own.
That doesn’t mean the business is immune to pressure, but it does mean demand tends to be more stable over time. And that stability is what long-term investors are often looking for.
Even while the stock price has declined, CAPREIT has continued operating a business built on recurring rental income and essential demand. Furthermore, it continues to generate consistent cash flow and pay its dividend.
And with the stock price trading so cheaply lately, CAPREIT now offers a much more attractive yield compared to historically.
Why this TSX stock looks so undervalued today
So, while it trades at a forward price-to-adjusted funds from operations (P/AFFO) ratio of 15.7 times today, roughly 33% below its 10-year average of 23.5 times, the bigger story, especially for dividend investors, might be its yield. For example, the TSX stock is currently yielding 4.5%, which is well above its 10-year average of 3.3%.
That’s also why smart investors often pay close attention to opportunities like this. It’s not about trying to predict exactly when sentiment will turn. Instead, it’s about finding stocks with strong long-term reliability and buying them at valuations where the timing doesn’t matter.
And when you buy a high-quality TSX stock that pays an attractive dividend too, like CAPREIT, it will pay you to wait.
That’s the core idea here. CAPREIT isn’t interesting because it’s been under pressure. It’s interesting because the pressure has come largely from external factors, while the long-term demand for its assets remains intact.
So, if you’re looking for a high-quality TSX stock you can buy at a discount and get paid to wait, CAPREIT is one of the best to consider.
