Canadian REITs for Lifelong Income

09/01/2015 10:00 am EST


Roger Conrad

Chief Analyst/Managing Partner, Capitalist Times

Roger Conrad, editor of Capitalist Times, maintains a specialized portfolio—the Lifelong Income Portfolio—designed for conservative, long-term income investors. Here, he looks at the portfolio’s three Canadian real estate investment trusts.

Despite heavy exposure to the resource-rich Alberta, Artis REIT (TSX: AX-UN; OP: ARESF) should report solid second-quarter results on August 6, thanks to a strong balance sheet, growth in other markets, and the cushion of below-market rents.

Investors shouldn’t expect a dividend increase anytime soon; however, the payout appears safe. Trading at 79% of book value and yielding 7.9%, Artis REIT rates a buy up to US$16.

Northern Property REIT (TSX: NPR-UN; OP: NPRUF) owns apartments in remote regions of Canada where mining and oil and gas production dominate the local economy.

Although the severe downdraft in oil prices presents meaningful headwinds, the REIT maintains a strong balance sheet and has diversified geographically.

In the first quarter, gains in stronger markets outweighed weakness in areas feeling the sting from reduced mining and drilling activity.

We’ll find out whether this resilience continued when Northern Property REIT reports second-quarter results on August 6. Right now, odds favor another dividend increase in November.

Northern Property REIT trades at 86% of its book value and rates a buy up to US$25.

Like Artis REIT and Northern Property REIT, RioCan REIT (TSX: REI-UN; OP: RIOCF) will take a hit from Canada’s slowing economic growth.

The company specializes in shopping centers and suffered a blow from the decision by Target (TGT) to exit the Canadian market.

Although the US retailing giant defaulted on 26 properties, the REIT’s policy of ensuring that no customer accounts for more than 5% of its revenue has helped to limit the damage.

Meanwhile, the REIT will also build 1.8 million square feet of retail space and 19,000 apartment units over the next seven years, providing a platform for future growth.

RioCan REIT hasn’t hiked its monthly dividend since February 2013 and CEO Ed Sonshine recently indicated that an increase probably isn’t in the cards for 2015.

Yielding 5.2% and trading at 1.13 times book value, RioCan REIT rates a buy up to US$28 for those who don’t own the stock already.

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