Real estate investment trusts (REITs) are great stocks for passive-income lovers. As opposed to owning your own rental property, owning a REIT requires no leasing, no rent collection, no repairs, and no ugly evictions. The REIT does all that for you. You just buy the stock and collect your monthly distributions.
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REITs are a great alternative to a rental property
With REITs, investors get to own the best-quality real estate properties, many of which are beyond affordability for a small private investor. Also, you don’t have to pay a premium to own these stocks. They are liquid and easy to buy and sell. Many REITs trades at an extreme discount to their private market value.
Lastly, many REITs pay dividends that are significantly higher than what you would get after expenses spent on a private rental property. After the recent market correction, many REITs are cheap and trading with attractive dividend yields (the annual dividend divided by the share price) that are above 5%.
If your interest is piqued on owning TSX-listed REITs, here are three diverse real estate stocks that pay a 5% distribution or better today.
A top industrial REIT for monthly passive income
Industrial real estate has been incredibly hot over the past few years. For years, industrial property supply has not kept up with fast-growing demand. That is especially so when you consider how e-commerce has become a huge part of our lives.
For every package you receive, you need a warehouse and distribution facility. This trend has been a positive for Dream Industrial REIT (TSX:DIR.UN).
Over the past few years, it has seen rental rate growth explode. Its properties are seeing record occupancy and high demand. That has supported over 10% annual cash flow growth since the pandemic. Today, it pays a monthly distribution worth $0.05833 per unit.
That equates to 4.95% dividend yield at today’s price. For well-located global industrial assets and an attractive monthly passive-income stream, this is an excellent long-term stock to hold.
A REIT with defensive niche assets
Another niche real estate stock to consider for passive income is NorthWest Healthcare Properties REIT (TSX:NWH.UN). It pays a $0.0667 monthly distribution. That equals a 6.11% distribution yield. If you are worried about a global recession, this is a solid stock to hold for passive income.
NorthWest has a high-quality portfolio of hospital, medical office, and life science properties. Given their essential nature, these properties have very long-term secure leases. This helps ensure stable monthly rents. A large majority of these leases are inflation-indexed or have annual contracted rent increases.
As a result, even if inflation rises, its cash flow streams are preserved. For a defensive stock with a high dividend yield, NorthWest is a great stock to own today.
A retail REIT with an elevated stream of passive income
Another defensive passive-income stock is SmartCentres REIT (TSX:SRU.UN). If you have ever been to a Wal-Mart store in Canada, you might see its penguin branded logo nearby. It owns essential, grocery-anchored retail properties across Canada. As mentioned, Wal-Mart is one of its largest tenants.
However, the REIT has a massive excess land footprint. Over the coming decade, it hopes to repurpose this into mixed live, work, and play communities. While it builds its massive development pipeline, investors collect a substantial 6.3% annual dividend yield.
This is a long-term strategy, so investors will need to be patient. However, it doesn’t hurt collecting a $0.1547 distribution per unit every single month.
