Chartwell: A Safe Haven REIT

02/02/2016 10:00 am EST


Gordon Pape

Editor and Publisher, The Income Investor and the Internet Wealth Builder

Finding low-risk places to invest is not easy in these turbulent times. But if you look for companies that have demographics in their favor and offer a reasonable yield, you may find some opportunities, explains Gordon Pape, editor of The Income Investor.

One area worth considering is businesses that specialize in residences for the growing senior population.

Chartwell Retirement Residences REIT (CSH-U:CN) is the largest owner and operator of seniors' residences in Canada.

The REIT indirectly owns and operates 175 residences across four provinces providing a complete range of seniors housing communities from independent supported living through assisted living to long-term care.

All REITs are highly interest sensitive; however, there is little likelihood of rate increases in Canada this year due to the fragility of the economy.

The trust pays monthly distributions of $0.0459 (about $0.55 annually) to yield just under 4.5%.

Chartwell also offers a distribution reinvestment plan that allows investors to purchase additional units at zero commission and also offers bonus units equal to 3% of the monthly payments.

Chartwell units trade mainly on the Toronto Stock Exchange; American residents, can also buy shares over-the-counter under the symbol CWSRF, however volume is extremely thin.

For Canadian residents, a high percentage of the distribution is treated as tax-deferred return of capital (78.4% in 2014). For this reason, it's a good idea to hold the units in a non-registered account.

Income investors are basically interested in two things: decent cash flow and no headaches. That translates into sound, stable businesses with no drama attached. Chartwell fills the bill.

It provides a wide range of residential accommodations for seniors, making it almost recession-proof.

The cash flow is modest but dependable and secure. Overall, Chartwell REIT is a good choice for investors looking for a low-risk.

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