Thursday, May 4, 2017

10 Canadian REITs With Growing Distributions

As one might guess from the growing number of real estate investment trusts ("REITs") in my investment holdings, I favor the REIT sector as it provides a generous initial yield and above-inflation distribution growth, without the headaches associated with active management of rental properties. Given my current difficulty finding compelling valuations in the Canadian stock market and with a little extra cash inside my TFSA and RRSP (where REITs should be held in order to minimize income taxes), it seems like an opportune time to update my entry from March 2016 that consisted of 10 REITs that had raised their distributions in the past 12 months. To slim down the list at May 2017 and to ensure that the REITs were fairly liquid, I only included companies with market capitalization in excess of CAD $1 Billion. The results were further narrowed by insisting that the REIT generate positive FFO over the past 12 months. The resulting screen with REITs ranked via their current distribution yield is presented below.



I own shares in three of the REITs above (H&R, Granite, and Canadian Apartment Properties), but would consider adding a couple of the other companies to provide geographic and industry sector diversification. Included below are my quick thoughts on all ten REITs.

H&R REIT - Likely the most diversified REIT by sector (industrial buildings, shopping centers, office properties), but with the slowest growing distribution.
Granite REIT – Concentration risk given Magna is largest client. Gives exposure to auto parts industry at a higher yield than through Magna directly.
Brookfield Property Partners – Cheapest priced REIT with a diversified portfolio of properties managed by the experienced team at Brookfield. Undesirable exposure to retail and office properties given my current REIT holdings.
Smart REIT – Owns a portfolio of shopping centers across Canada, but unlike Riocan, they tend to raise their dividend yearly.
Choice Properties – Exposure to grocery store giant Loblaws at a good initial yield and at a fair price. Downside is the obvious concentration in Loblaws properties.
Boardwalk REIT – Residential housing REIT that has high exposure to the Alberta economy. It is priced relatively cheap compared to other apartment/residential REITs.
CT REIT – The most expensively valuded REIT owns properties used by Canadian Tire which is a strong brand within Canada. Waiting for a better price to buy is advised.
Allied Properties – Own urban office properties and has a record of slowly raising its payout. Waiting for a better entry point is advisable given how close it is trading to its 52-week high.
Canadian Apartment Properties – Diversified exposure to apartment properties across Canada and a growing international portfolio. Currently expensive and a slow growing distribution.
Canadian REIT – Longest record of annual distribution increases of any REIT in Canada at 15 years. Fairly priced but low yield and slow growing distribution. 

Are there any Canadian REITs that you would consider buying at their current prices?

4 comments:

  1. All with great dividend yields and potentials. Well done

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    1. Thank you for the compliment. Here's hoping the post introduced readers to a few new names within the Canadian REIT industry.

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  2. CAR.UN would be my buy -- on a 10% drop from its highest level of the year.

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    1. A 10% drop from it's highest level of the year...about $30.50, a little lower than when I topped up my position in January 2017 around $31. On verra si CAR.UN tombe a ce niveau.

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