In Canada, real estate investment is a popular choice for those looking to grow their wealth. However, not everyone has the time, funds, or energy to invest in individual properties. This is where real estate investment trusts (REITs) come in. REITs offer a way to participate in real estate investments without the hassle of managing or financing properties on your own. If you're considering REIT investing in Canada, this guide will provide you with valuable insights and our top picks for the best Canadian REITs in 2023.
What are real estate investment trusts (REITs)?
Before diving into the best Canadian REITs, let's understand what a REIT is. A REIT, or real estate investment trust, is a company that owns or manages income-generating properties. These companies are publicly traded, meaning you can invest in them just like any other stock. Investing in REITs allows you to diversify your portfolio and participate in the real estate market without taking on the risks and responsibilities of individual property ownership.
Types of REITs
There are various types of REITs to consider when investing. Residential REITs focus on apartment buildings and multi-family units. Retail REITs invest in properties like shopping malls and stores. Office REITs specialize in office buildings, while healthcare REITs manage hospitals, doctors' offices, and retirement homes. Some REITs also invest in mortgages. Choosing the right type of REIT depends on your interests and comfort level.
How do REITs work?
Investing in REITs is relatively simple. These companies lease their properties and collect rental payments from tenants. As an investor, you receive a portion of the income generated by the REIT. This business model provides a clear and transparent way to track your investment's performance and income.
Investing in REITs in Canada
REIT stocks can be an excellent addition to your portfolio. They offer a low-risk investment with manageable returns. REITs provide investors with the opportunity to earn income through eligible or non-eligible dividends. Dividend amounts vary depending on the company and sector, ranging from 2% to nearly 10%. With their impressive dividends and potential stock growth, REITs can provide solid returns.
Are REITs a good investment?
In general, REITs are a suitable investment option for most investors. They offer a stable income stream and lower risk compared to other investments. However, it's crucial to consider the pros and cons of investing in REITs before making a decision.
Some advantages of REITs include strong and stable dividends, easy buying and selling, and simplicity in investing. On the flip side, REIT stock prices may not grow rapidly due to the distribution of income as dividends. Additionally, investors have limited control over the real estate itself. Taxation of dividends is another consideration, but this can be managed by holding REITs in tax-advantaged accounts like TFSAs or RRSPs.
Investing in a REIT vs investing in rental properties
Investing in rental properties is another common way to enter the real estate market. While both options involve real estate, they have significant differences. Rental properties offer the potential for higher returns but require more management and a larger initial investment. On the other hand, investing in REITs is simpler and more accessible but provides less control and limited growth potential. The choice between the two depends on your preferences and willingness to take on additional responsibilities.
What to look for in a REIT
If you've decided to invest in a REIT, it's essential to consider several factors before making a selection. Look for REITs that offer a combination of capital appreciation and dividends. Strong properties and reliable tenants are indicators of a well-performing REIT. Consider the experience and track record of the management team. Diversification, lease length, location, and financial stability are other key factors to assess when researching REITs.
How to invest in REITs in Canada
Investing in a REIT in Canada is as straightforward as investing in any other stock on a major exchange. Simply open a brokerage account, fund your account, and purchase shares. Selling your investment is equally easy, making the entire process simple and straightforward.
Best Canadian REITs for 2023
Now, let's explore some of the best Canadian REITs to consider for your investment portfolio in 2023. We have selected a range of REITs that have shown strong performance and offer attractive dividends. Please note that the following information is accurate as of January 20, 2023.
InterRent REIT
InterRent REIT (TSX:IIP-UN.TO) focuses on residential properties in high-growth urban markets across Canada. They prioritize building strong communities and providing exceptional customer service. Sustainability is also a core value for InterRent. With a stock price of $13.97 per share, InterRent offers a monthly dividend of $0.03 per share.
Granite REIT
Granite REIT (TSX:GRT-UN.TO) owns over 140 properties across five countries, with a focus on large industrial properties. Their impressive tenant list includes DHL, Home Depot, and Wayfair. Nearly 100% of Granite REIT's properties are occupied, and they emphasize strategic capital allocation and strong corporate governance. With a stock price of $78.88 per share, Granite REIT provides a monthly dividend of $0.02583 per share.
Boardwalk REIT
Boardwalk REIT (TSX:BEI-UN.TO) offers quality apartments and commercial and retail office space across Canada. They prioritize diversity, inclusion, and providing a vibrant community for their residents. With a stable financial foundation and manageable debt levels, Boardwalk REIT has a strong track record of growth. The stock price is currently $53.01 per share, and the monthly dividend is $0.09 per share.
H&R REIT
H&R REIT (TSX:HR-UN.TO) stands out for its versatility, with properties in the retail, office, residential, and industrial sectors. They boast over $10 billion in total assets and emphasize liquidity and experienced management. With a stock price of $12.82 per share, H&R REIT pays a monthly dividend of $0.0458 per share.
SmartCentres REIT
SmartCentres REIT (TSX:SRU-UN.TO) is a major player in the Canadian retail landscape, operating over 180 locations across the country. They are expanding into apartments, hotels, and townhouses while maintaining their focus on retail. SmartCentres REIT has a strong leasing team and a vast retail space portfolio. With a stock price of $27.90 per share, SmartCentres REIT offers a monthly dividend of $0.1542 per share.
Canadian Apartment Properties REIT
Canadian Apartment Properties REIT (TSX:CAR-UN.TO) primarily focuses on residential properties in Canada and internationally. With over 20 years of successful growth and $18 billion in assets, CAPREIT is one of Canada's largest residential REITs. The stock price is currently $47.23 per share, and the monthly dividend is $0.1208 per share.
CT REIT
CT REIT (TSX:CRT-UN.TO) offers a diversified portfolio of over 370 retail properties, along with industrial and development properties across Canada. This REIT has a long and mutually beneficial relationship with Canadian Tire, its majority shareholder and largest tenant. CT REIT emphasizes growth, security, and reliability. With a stock price of $16.24 per share, CT REIT pays a monthly dividend of $0.07232 per share.
Takeaways
Investing in REITs can be a smart strategy for diversifying your portfolio and generating steady income. The best Canadian REITs for 2023 offer a range of opportunities to invest in different sectors and locations. Consider your financial goals, risk tolerance, and investment preferences when choosing the right REIT for you. Remember to conduct thorough research, review financial performance, and consider the expertise and experience of the management team. By investing in the right REIT, you can participate in the real estate market without the high costs and complexities of individual property ownership.