Fight Inflation With This Canadian REIT’s Massive 9% Yield

Inovalis REIT (TSX:INO.UN) has an enticing 9% yield that can help Canadian investors dodge and weave past the recent inflation surge.

| More on:

The broader markets are in a weird spot after churning for the first quarter, and many beginner investors are likely at odds about what to do with their spare cash on the sidelines. On the one hand, there’s market volatility that could lead to big losses at the hands of Mr. Market over the near term.

With a 2023 recession a growing possibility, it may be a wise idea to just wait for the storm that’s supposedly on the horizon to pass before putting a bit of money to work.

On the other hand, there’s inflation. It’s high, and it continues to get higher each CPI report. Eventually, inflation will peak, but the penalty for holding too much cash will likely remain elevated.

Indeed, we’re all too used to the days of inflation in the tame 1-3% range. Are those days over, even as central banks look to rate hikes, with a half-point raise possible next month?

Probably not. But it could take many quarters before inflation is brought back down to more manageable levels. Further, there’s always the risk that inflation could remain above 5% for years to come. For conservative investors, there’s a strong incentive to take more risk in the equity markets. Inflation may be a foe of investors, but it’s an even bigger foe to savers or those who aren’t inclined to take on any risk with their wealth.

Inflation is here: It’s time to fight back with high-yield investments

Undoubtedly, many “safe” investors have looked to alternative assets: Bitcoin, precious metals, real estate, real assets (like art and collectibles), infrastructure, commodities, and all the sort. They’re intriguing investments to help you soften the blow of inflation. But are they really the best place to be after their recent run-up?

Commodities have been hot, perhaps too hot for most to handle. Bitcoin remains highly speculative and more volatile than the stock market. Real estate may not be as safe as it seems, as rates look to rocket higher. Indeed, it’s a tough place to be in for investors these days.

Fortunately, the ultimate weapon against inflation may lie in the stock market. Arguably, they’re still the best way to grow your wealth on an inflation-adjusted basis. While I’m not against diversifying with alternative assets, I still think dividend stocks are among the most compelling plays in this rather confusing, inflationary world.

Inovalis REIT (TSX:INO.UN) is one intriguing high-yield play I’d look to as inflation continues to weigh on our purchasing power.

Inovalis REIT: A colossal 9% yield that’s safer than you think!

Inovalis is a European office real estate investment trust with a huge distribution yield, standing at a towering 9.2% at writing. To the surprise of many, the payout is actually sustainable. Shares are down around 20% from their high. Though the +9% yield seems stretched, it’s worth noting that the normalized yield lies in the 8% range. That means the high yield is by design. Still, investors won’t get much in the way of capital gains through normal conditions. Shares have essentially flatlined for the years leading up to the COVID crash.

Though office real estate demand is unlikely to recover to pre-pandemic levels anytime soon, I think that any further COVID resurgences could bring forth an opportunity to nab a 10% yield from the name. The French and German office markets seem more durable than in the U.S. or Canada, given such nations may not embrace remote work with open arms once COVID finally goes away.

In any case, INO.UN is an intriguing real estate play whose yield can help you navigate the inflationary storm. Just be ready for volatility.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Joey Frenette has no position in any of the stocks mentioned. The Motley Fool owns and recommends Bitcoin. The Motley Fool recommends Inovalis REIT.

More on Investing

Train cars pass over trestle bridge in the mountains
Dividend Stocks

Is CNR Stock a Buy, Sell, or Hold for 2025?

Can CNR stock continue its long-term outperformance into 2025 and beyond? Let's explore whether now is a good time to…

Read more »

engineer at wind farm
Energy Stocks

Invest $20,000 in This Dividend Stock for $100 in Monthly Passive Income

This dividend stock has it all – a strong outlook, monthly income, and even more to consider buying today.

Read more »

Hourglass and stock price chart
Stock Market

It’s Not Too Late: Invest in These TSX Growth Stocks Now

Solid fundamentals of these top TSX growth stocks could help them maintain strong upward momentum in the years to come.

Read more »

coins jump into piggy bank
Dividend Stocks

The Smartest Dividend Stocks to Buy With $500 Right Now

These top dividend stocks both offer attractive yields and trade off their highs, making them two of the best to…

Read more »

stocks climbing green bull market
Stocks for Beginners

3 TSX Stocks Soaring Higher With No Signs of Slowing

Don't ignore stocks just because they look like they're at a high price. Instead, see exactly why they've driven so…

Read more »

dividends can compound over time
Bank Stocks

Is TD Bank Stock a Buy for Its 5.2% Dividend Yield?

TD Bank stock offers a rare 5.2% dividend yield—can it rebound from challenges and reward contrarian investors? Here's what to…

Read more »

chart reflected in eyeglass lenses
Investing

How Should a Beginner Invest in Stocks? Start With This Index Fund

This Vanguard index fund is the perfect way to start a Canadian investment portfolio.

Read more »

analyze data
Bank Stocks

Is BMO Stock a Buy for its 4.7% Dividend Yield?

Bank of Montreal is up 20% since late August. Are more gains on the way?

Read more »