Best REIT Stocks In Canada For November 2023

Looking for some real estate investment trusts, or REITs for short, for your portfolio? Want the best REITs? The reality is that REITs can have different business goals and therefore more than one can fit your portfolio thus allowing you to better diversify your portfolio.

In general, you are looking for income with a REIT stock and not a growth stock like Netflix, Amazon or Shopify. During your search for income, don’t ignore the potential for income growth to keep up with inflation. It’s a mistake many beginner investors make.

While the largest REIT is Canadian Apartment Properties REIT, it might not be the best fit for your portfolio. The best REITs to invest in Canada for a good and safe income would be CT REIT. So you see, the largest REIT isn’t always the best.

The last thing you want is a REIT that pays the same income year after year as it means you actually make less due to inflation.

Now, you might not be aware but there are over 34 Canadian REITs trading on the Toronto Stock Exchange (TSX). However, only 20 have a market capitalization above $1B (Covid-19 and the recession impacted the value).

Continue reading but out of the 34 REITs, I have selected the top 4 in no particular order.

1. CT REIT – Retail REIT – The stength is that the tenants are mostly businesses from Canadian Tire Corporation and your thesis should hinge on the strength of Canadian Tire Corporation.
2. InterRent REIT – Residential REIT – The rental market is strong due to high prices of home ownership and immagration is also strong.
3. Granite REIT – Industrial REIT – A diversified portfolio across 7 countries providing space for big corporations.
4. Canadian Apartment Properties REIT – Residential REIT – The rental market is strong due to high prices of home ownership and immagration is also strong.

List of all Canadian REITs

Let’s start by looking at the full list of REITs and then drill down from there. The Canadian REIT sector has 7 industries to which a REIT belongs to based on the services they provide. Each industry can be particularly appealing to you but it’s about the business and the location.

• Residential REITs focus on residential properties like apartment buildings.
• Industrial REITs focus on industrial properties for businesses in manufacturing.
• Office REITs focus on office buildings where people work. How is work from home impacting this industry?
• Retail REITs focus on retail properties handling direct to consumers sales like shopping malls.
• Healthcare REITs primarily manage locations providing healthcare including retirement facilities.
• Hotel & Motel REITs cover the short-term rental business.
• Diversified REITs are covering multipe business as outlined above.

Knowing the industry they serve is quite important as it highlights what can influence their business. Is it commercial real estate or consumer related for example? What’s the economy of the region driving those factors. That’s what defines the strength of the REITs.

The list below for reference is sorted by market capitalization rather than yield. A REIT has a high yield just by the nature of the REIT and I am not looking for the REIT that pays the most but the REIT that will serve me best in the following criteria:

• [Quantitative] Decent Income Distribution – Between 4% and 6%
• [Quantitative] Consistent Payout – 3, 5 and 10 year averages should be consistent
• [Quantitative] Distribution Growth Potential – At or above inflation is good enough for a REIT
• [Qualitative] Stock Growth Potential – Can it grow and what is the strategy?

Most Canadian REIT investors will have the same criteria with different priorities but they are pretty standard. Below is the breakdown of all Canadian REITs by industries.

REIT Stocks vs REIT ETFs

There aren’t that many REIT stocks in Canada and you may be tempted to assess a REIT ETF (or mutual fund) as an alternative.

It really depends on what you are looking for. I usually find that real estate investors who look into REITs are chasing the yield … Is that you? Some REITs have high dividend yield and that can be a risk, not an advantage.

If you chase yield, consider Covered Call ETFs as you may have less risk than exposing your portfolio to a small cap REIT.

REIT Stocks vs Actual Real Estate

A real estate investment through a REIT is not the same as buying and owning a rental properly even if they both generate income.

The REIT while it holds income producing assets is also working on expending and managing loans and it’s possible the management team does a poor job which can hurt the stock. So you put your trust in a management team and the stock market instead of the actual real estate market.

Picking the BEST Canadian REITs

To find the best Canadian REITs fitting my criteria, I choose to go through the following steps.

• Sort the REITs based on the Chowder Score (Yield and Dividend Growth)
• Sort the REITs by Dividend Increases (Consistency in dividend increases is good)

I am favoring residential REIT due to the shortage of homes and high immigration. One key metric to focus on when reviewing REITs is there occupancy rate.

Narrow Down Your Canadian REITs

I decided to eliminate the little players. They may well have a lot of growth but I want an established REIT of at least $1B in market capitalization. So we start with the largest REITs. They can have funds to expand and play in the big cities. That leaves us with the following REITs.

While the largest REIT in Canada might not be the best, many are small and brings small cap exposure to your portfolio. It might not be what you want.

For the purpose of my selection, I will go with $1B as a minimum market capitalization. I am going to exclude the industrial REIT industry as I don’t understand that industry. For example, the healthcare REIT industry is also not an industry I understand.

There is definitely a growing market but I am not sure how the business model works. It leaves me with the list below sorted by market capitalization.

Compare Your Selected Canadian REITs

Now comes the hard part. The easy filtering is done. I could easily remove those with a yield under 4% but I am curious if they grow their yield and what the properties actually are.

If you have Wal-Mart as a renter, the chances of long-term business are much stronger than having an arbitrary small business. Personally, I have invested in both REI.UN and CUF.UN in the past. See my portfolio holdings for details.

The TOP 4 Canadian REITs

Note that to screen stocks for income require unique dividend data. Not many screeners focus on dividend data and dividend stength. You should consider a screener such as Dividend Snaspshot Screeners.

Granite REIT

Granite REIT engages in the acquisition, development, and management of industrial properties in North America and Europe. Its portfolio consists of various manufacturing, corporate office, warehouse and logistics, and product engineering facilities.

Logistics and distribution warehouses and multipurpose buildings constitute the majority of its assets. Granite REIT is a spin-off of Magna International which still continues to be its major tenant.

Magna accounts for ~60% of Granite’s total revenues. Granite REIT has a diversified yet balanced geographical presence in Canada (26% of revenue), U.S. (31%), Austria (27%), and Europe (15%). It owns 85 investment properties with 33 million square feet of leasable area.

Key Investment Data

InterRent REIT

InterRent operates as owners and property managers of homes for more than 12,000 Canadian households and growing. They are a passionate group of individuals who work as a team and are encouraged to use their voices to have a positive impact in their communities. The demand for rental apartments is consistently strong, stemming from a variety of factors including improved youth employment and an aging Canadian population, and exceedingly high net international migration.

The company’s focus is to expand in the core markets of GTA, Montreal, the National Capital Region, and relating markets. Areas are selected based on their ability to meet the following parameters and contribute to the REIT’s growth-oriented strategy. Healthy economical regional centres & neighbourhoods; regions that have stable employment profiles derived from strong and sustainable industries and are expected to have continued population growth. 

The management of environmental, social, and governance (ESG) topics is truly woven in the fabric of their day to day. They are passionate about implementing sustainable projects and their objective is to pursue pilots to reduce their environmental impacts. These initiatives benefit their residents, provide development opportunities for their teams, and help to safeguard their environment through lower energy consumption, better water and waste management, and reduced GHG emissions.

Their social objective is to offer an unsurpassed resident experience. They believe that dealing with people is the heart of any business, and this is especially true in the multi-family sector since their business impacts someone’s home. To maintain the confidence of investors and properly oversee the activities of management, adopting and upholding high standards of governance practices are essential.

Key Investment Data

Canadian Apartment Properties REIT

Canadian Apartment Properties or CAPREIT is a growth-oriented investment trust. The REIT invests in residential properties, including apartment buildings, townhouses and land lease communities located in close proximity to major urban cities across Canada.

It is the largest Canadian REIT by market capitalization value. As Canada’s largest multi-family residential REIT, Canadian Apartment owns interests in more than 51,000 residential units, comprising 44,000+ residential suites and 32 manufactured home communities.

It also has land lease sites located near major urban areas across Canada and The Netherlands. Canadian Apartment has a good mix of properties across affordable, mid-tier and luxury sectors which offer diversification of income. CAPREIT is best known for its quality portfolio.

Key Investment Data

CT REIT

CT Real Estate Investment Trust is an unincorporated, closed end real estate investment trust formed to own income producing commercial properties primarily located in Canada.

Its portfolio is comprised of over 350 retail properties, four industrial properties, one mixed-use commercial property, and one development property totaling approximately 29 million square feet of GLA. CT REIT is Canada’s premier net lease REIT and creates long-term value for unitholders by growing its portfolio of income producing properties and development projects, benefiting from its relationship with its most significant tenant and controlling unitholder, Canadian Tire Corporation (CTC).

CTC is a strong investment grade tenant, with annual rental growth built into long term leases. CT REIT benefits from CTC’s understandings of the continually evolving retail marketplace, helping to shape their strategy and guide their plans.

A very meaningful portion of growth is contractually built into CT REIT's structure through rent escalations and preferred access to additional properties required to support CTC's ongoing business requirements. This close association and alignment between them is a competitive differentiator that provides important insight into potential real estate acquisitions and development opportunities.

Additionally, located in each province and two territories, CT REIT’s properties are situated in highly desirable retail locations. Many are conveniently located near high traffic routes, highly visible from the street, easy to access, and have ample parking. The properties are geographically diverse with more than two-thirds of CT REIT’s rent coming from properties in large urban markets.

Key Investment Data

Canadian REIT ETFs

If you find it too difficult to invest in a specific REIT, you can always buy a Canadian REIT ETF. Be sure to look at their holdings as they may only hold a subset of the REITs.

• iShares S&P/TSX Capped REIT Index Fund 
• BMO Equal Weight REITs Index ETF 
• Vanguard FTSE Canadian Capped REIT Index ETF 

The above mentioned ETFs are probably the best Canadian REIT ETFs at this point in time. However, be on the lookout as most financial institutions are entering the ETF market and they should all be creating their own in due time.

Canadian REITs Summary

I will admit that it’s impressive to see the number of REITs available in Canada. I was pretty surprised at the business of H&R REIT with their corporate tenants. In the past, when I first purchased REITs, I had no understanding of the AFFO and since I learned about that metric, it changed how I evaluate REITs forever.

You HAVE to read their financial report for the year-end. It’s not just raw numbers. It highlights their businesses and strength. You get to understand the strength of their sector.

Which is the best Canadian REITs? Well, it really depends on your goals. Do you want to see dividend growth? Some of them have it. Do you want to only pick below 90% AFFO payout? Some of them fit the bill. Do you want to see growth in value? Some of them have it. Do you want high income? Some of them have it.

As you can see, there isn’t just one Best Canadian REIT. There is a best Canadian REIT for your portfolio based on your criteria. Are you nearing retirement? Are you starting and diversifying?

If you are new to REIT investing, you need to understand REIT taxation prior to making a purchase. The account you decided to use has a big tax impact.