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2 Types of REITs That Will Let You Collect Income for Decades

Christopher Liew, CFA
Pixelated acronym REIT made from cubes, mosaic pattern

Real Estate Investment Trusts, or REITs, are good investment options for people who want to collect passive income for life. Just like choosing the best dividend stocks, you have to pick a REIT with a solid track record of delivering dividend income. However, most REITs offer modest capital appreciation.

In Canada, there are eight types of REITs trading on the TSXBoardwalk REIT (TSX:BEI.UN), Canadian Apartment Properties Real Estate Investment Trust (TSX:CAR.UN), or CAPREIT, and RioCan Real Estate Investment Trust (TSX:REI.UN) are three of the REITs that investors can include in their portfolios.

Residential REITs

Boardwalk REIT currently owns and operates more than 200 communities. There are over 28 million net rentable square feet composing 33,000 residential units. The mission of this Calgary-based REIT is to provide prospective dwellers with the friendliest communities.

If you’re a unitholder, Boardwalk REIT will ensure that the value of your trust units will increase while you receive monthly cash distribution. For investors, the REIT pays a dividend of 2.46%.

With an investment of less than $50 per share in this $2.08 billion REIT, you become a quasi-landlord to residents in multi-family communities located in Alberta, Ontario, Quebec and Saskatchewan.

CAPREIT is a bigger residential REIT than Boardwalk. The $7.9 billion REIT is one of Canada’s largest residential landlords that provide quality accommodations. The REIT is also considered a growth-oriented investment trust.

As of March 2019, the owning interests are in 53,143 residential units composed of 45,446 residential suites and 45 manufactured home communities (MHC) with a total of 7,697 land lease sites.

You can also invest in CAPREIT for less than $50 per share. But this time, you’ll be transformed into a pseudo-landlord not only across Canada, but also in Ireland and the Netherlands as well. CAPREIT pays 2.7% dividend, which is absolutely sustainable given the payout ratio of only 14.56%.

Boardwalk and CAPREIT are focused on urban centres, where demand for residential or apartment units are strong and vacancy rate is low. It’s for this reason that the two residential REITs are doing well and generating profits.

Retail REIT

In the case pf RioCan, this $8.1 billion REIT is one of the largest in Canada. The owned, developed, and managed properties are mostly mixed-use properties situated in prime, thickly populated, and transit-oriented locations.

At present, there are more than 200 properties across Canada in the portfolio with well-established tenants such as Cineplex Inc., Metro Inc., and Walmart Inc. The committed retail occupancy rate in six major markets is 97.2% with 26.2 million square feet of space is in the development pipeline.

RioCan is raking in the profits. The average net income for the last three years is $691.3 million. The five-year average dividend yield is 5.49%. Thus, RioCan is an attractive investment and a steal at $26.76 per share.

There are other types of REITs you could consider. But if you’re raring to be a mock owner of prime real estate, the passive income you will collect from the three REITs is for life.

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Fool contributor Christopher Liew has no position in any of the stocks mentioned.

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