6 attractive Canadian REITS
What are we looking for?
Canadian real estate investment trusts (REITs) with sustainable distributions backed by strong tenant demand.
The screen
Most REITs are down this year. That’s partly due to investor worries about softening business and consumer confidence, and an uncertain outlook for office buildings. The unit prices of REITs have also felt the sting of higher interest rates, which have driven up the carrying costs for debt. At the same time, income-focused investors – normally attracted to high-yield REITs – have had their heads turned by the rising yields on bonds.
Still, many top Canadian REITs offer more-than-competitive yields and bright outlooks. They include REITs with stalwart retail giants to anchor their properties and REITs focused on industrial properties or residential buildings.
Our search started with a broad look at this country’s REITs. From there, we singled out those with strong tenant bases before applying our TSI Dividend Sustainability Rating System; it awards points based on key factors:
- One point for five years of continuous dividend payments, two points for more than five;
- two points if it has raised the payment in the past five years;
- one point for management’s commitment to dividends;
- one point for operating in non-cyclical industries;
- one point for limited exposure to foreign currency rates and freedom from political interference;
- two points for a strong balance sheet, including manageable debt and adequate cash;
- two points for a long-term record of positive earnings and cash flow to cover dividends;
- one point if the company is an industry leader.
Companies with 10 to 12 points have the most secure dividends, or the highest sustainability. Those with seven to nine points have above-average sustainability; average sustainability, four to six points; and below average sustainability, one to three points.
More about TSI Network
TSI Network is the online home of The Successful Investor Inc. – the group of widely followed Canadian investment newsletters by editor and publisher Pat McKeough. They include our award-winning flagship newsletter, The Successful Investor, and the TSI Dividend Advisor. TSI Network is also affiliated with Successful Investor Wealth Management.
What we found
Attractive Canadian REITs
| RANKING* | COMPANY | TICKER | DIV. SUSTAIN. RATING | POINTS | DIV. YLD. (%) | MKT. CAP. ($ BIL.) |
| 1 | Choice Properties REIT | CHP-UN-T | Above Average | 7 | 5.7 | 9.6 |
| 2 | Canadian Apartment Properties REIT | CAR-UN-T | Above Average | 7 | 3.0 | 8.1 |
| 3 | CT REIT | CRT-UN-T | Average | 6 | 6.2 | 3.4 |
| 4 | Dream Industrial REIT | DIR-UN-T | Average | 6 | 5.3 | 3.7 |
| 5 | Granite REIT | GRT-UN-T | Average | 6 | 4.3 | 4.8 |
| 6 | Killam Apartment REIT | KMP-UN-T | Average | 6 | 4.1 | 2.0 |
Source: Dividend Advisor.
Our TSI Dividend Sustainability Rating System generated six REITs. Toronto-based Choice Properties REIT CHP-UN-T counts one of Canada’s biggest retailers, Loblaw Cos. Ltd., as the principal tenant for many of its properties. CT REIT CRT-UN-T, also headquartered in Toronto, is backstopped by long-term leases with Canadian Tire, its main lessee. Also based in Toronto, Dream Industrial REIT DIR-UN-T focuses on industrial properties and Granite REIT GRT-UN-T operates industrial, warehouse and logistics buildings. Killam Apartment REIT KMP-UN-T, headquartered in Halifax, owns and operates a portfolio of apartment properties and manufactured housing communities (trailer parks). And finally, Toronto’s Canadian Apartment Properties REIT CAR-UN-Tis one of Canada’s largest apartment property owners.
Scott Clayton, MBA, is senior analyst for TSI Network and associate editor of TSI Dividend Advisor.