The idea of passive income is one that should be appealing to any investor. When being paid passive income, you are technically being paid to sleep.

Downsides of real estate investing

With real estate investing, there are many ways to build passive-income streams. In fact, there are so many that it can be difficult to choose which way works for you. Some methods require you to be a landlord, which isn’t true passive income and can come with a lot of issues. It can require constant work and a lot of your time just to break even.

By far the easiest way to get into real estate investing is by buying real estate investment trusts, or REITs. There are many REITs to pick from, and all of them have different strategies for creating wealth.

Picking individual REITs can be a daunting task, and it may seem overwhelming to pick a winning one. Although quality REITs do exist, like Choice Properties and SmartCentres, you can never guarantee they’ll keep winning.

Solution to real estate investing

The issue of picking REITs and creating reliable passive income is why I want to introduce you Fools to two of my favourite REIT exchange-traded funds (ETFs).

CI First Asset Canadian REIT ETF (TSX:RIT) and BMO Equal Weight REITs Index ETF (TSX:ZRE) are two REIT ETFs that aim to do similar things through slightly different strategies. They both pay respectable dividends, with CI First Asset’s Canadian REIT ETF (CI) paying a 4.3% yield and BMO’s Equal Weight REITs Index ETF (BMO) paying 4.1%.

CI has a slightly higher management expense ratio (MER) of 0.9% compared to BMO’s MER of 0.61%.

Investing in CI will offer you an actively managed fund, which has a history of higher returns and a high yield. It also comes with a slightly lower beta of 0.51 compared to BMO’s 0.58.

CI has the ability to move in and out of REITs as it sees fit, which can offer downside protection as well as more upside. The history of higher returns, lower beta, and higher yield seem more than enough for me to justify the higher MER.

BMO  aims to match the performance of the Solactive Equal Weight Canada REIT Index. While this has some benefits, such as having equal exposure to all sectors of REITs, the risk of missing potential gains may outweigh the benefits to potential investors.

Conclusion

Both REIT ETFs have great potential for growth. If you’re looking for higher passive income, then BMO may be for you, considering its lower MER. Therefore, it works out to pay slightly more cash every year. However, CI is, overall, a better pick due to its lower beta, higher historic growth, and ability to change asset allocation. As always, these are not recommendations. Take this information as a start to your own research.

The post 2 Real Estate ETFs That Can Carry You to Retirement appeared first on The Motley Fool Canada.

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Growth, dividends, and a low beta are some of the criteria that determine fantastic companies. Unfortunately, you don’t see too many great companies meeting that criteria these days, especially in the Canadian market. Open Text (TSX:OTEX)(NASDAQ:OTEX) is a Canadian tech company that meets that criteria and deserves a strong look for your portfolio.

OTEX is a technology company that provides Enterprise Information Management software to its clients around the world. OTEX has experienced some natural growth but also isn’t afraid to acquire companies it thinks would add to its company.

Between June 30, 2018 and 2019, its net income increased by 15%; however, total revenue only increased by 1.87%, meaning that not much new cash made its way into the business. OTEX recently announced it’s acquiring another tech company called Carbonite, and over the next few years, this should add to total revenue.

Balance sheet and cash flow

Between the same period of June 30, 2018 to 2019, total assets increased by 2.1%, while liabilities increased by a meagre 0.03%. This is very healthy, especially considering its long-term debt went down during that period! Another metric to consider is cash flow. Free cash flow also looks healthy with a 25.6% increase.

Over the past 52 weeks, OTEX has increased by 33.26% versus the TSX at 12.84%.

Long term

OTEX has a low beta of 0.77, which compares its volatility to the TSX. This means that OTEX is less volatile than the overall market. If you are someone who gets squeamish when markets fluctuate, that beta is a good sign for you. Of course, it has ups and downs, as many other stocks do, but I see these as buying opportunities to continue adding to my position in it.

OTEX was recently named a leader in digital asset management for customer experience by Forrester, which called its capabilities “best in class.” OTEX has a history of being a great company, and it’s recognized across Canada. This is a great sign for the longevity of this company; it means that customers are very happy with Open Text’s software and its capabilities.

Since Open Text pays a dividend of $0.92, or 1.6%, at the time of writing, you can reinvest your dividends to further the compounding effect of investing long term.

Foolish takeaway

As always, this isn’t a recommendation, so take this as a start to your own research. I firmly believe in the future of Open Text as a long-term investment and hold it in my own portfolio.

The post A Low-Beta Dividend Stock That Has Massive Growth Potential appeared first on The Motley Fool Canada.

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