When it comes to tangible investments, few assets come close to real estate. But the problem with real estate is that it’s only for a relatively small portion of investors: investors with enough capital to buy a piece of land or property. There are ways to invest in real estate with less investment capital than it takes to buy a property whole, like pooling capital from multiple investors. But even that’s not a viable option for investors with only a few thousand dollars to invest.
A better option for them is publicly traded REITs. You can invest as much or as little as you want, and if you are investing purely from a passive-income perspective (made up of REIT’s dividends), REITs also tend to be pure passive investments. You don’t have to track the stock actively, and the dividend income will be disbursed as per schedule. This makes it a significantly more manageable passive investment compared to rental properties.
A dividend and growth REIT
Few REITs combine the title of Dividend Aristocrat, decent yield, and capital-appreciation prospects in as good a mix as Granite REIT (TSX:GRT.UN). It’s a premier commercial REIT, with a significant portion of the portfolio comprised of some of the most highly sought-after properties — i.e., e-commerce logistics. This makes it an ideal real estate buy for growth and revenue consistency.
The REIT is currently offering a yield of 3.45% at a payout ratio of 31.94%. It has a 10-year CAGR of 17.5% and is quite fairly valued right now. If you invest $20,000 in the REIT, you can earn a yearly dividend income of $690. But that’s a pittance compared to what its capital growth can offer you. At 17.5% a year, the company can grow your $20,000 capital by five times in about a decade.
A diverse REIT
One of the chief selling points of New Glasgow-based Crombie REIT (TSX:CRR.UN) is the diversity of its portfolio. The portfolio is 297 properties. Most are wholly owned by the REIT and a few are joint ventures, and it covers the span of commercial properties — i.e., retail, office, and industrial. The bulk of its rent is generated from its retail properties. The REIT also has a decent number of projects under development.
Crombie hasn’t historically been a very decent growth stock, but it was climbing before the pandemic. It fell hard during the 2020 crash but was soon on its way and has grown 43% in the last 12 months. Even though the growth momentum is still strong, and the REIT stock might keep climbing for a while now, a better reason to buy it might be its juicy 4.8% yield. With $20,000 invested, the REIT could get you about $968 a year.
A REIT for dividend growth
If you are looking for a REIT that’s growing its dividends at a time when others are having trouble sustaining their payouts, Artis REIT (TSX:AX.UN) is it. The REIT grew its payouts at the end of 2020 and then again in 2021. And since it slashed its dividends in half in 2018, it’s improbable that the REIT might do so again.
And if its goal is to reclaim the lost payout, which is still about 80% away from the current payout, you might see your dividend income grow at a powerful pace. The recovery momentum for Artis has been quite strong, and the REIT has grown over 50% in the last 12 months. The current yield is generous enough at 5.1%.
Not all REITs are equally generous with their payouts, and relatively few REITs offer truly safe dividends. But if you pick your REITs based not just on the history, but their portfolios and how the asset class the REIT is focused on is performing, you can make a reasonably accurate assumption of the reliability of its dividends.