There are quite a few undervalued stocks on the TSX today. However, not all of them will recover quickly should we enter a recession. And that’s especially true for real estate investment trusts (REIT) in certain sectors.
If a REIT focuses mainly on retail, they aren’t going to be doing well. Same for if they focus on rental properties, with the market being what it is. That’s why it’s important to look for high-yielding REITs that could be the TSX stock which helps recover your funds fast.
Identify the strongest market
If there’s one area of REITs that remains strong, it’s industrial properties. These properties need little upkeep, and can be acquired and maintained for low cost. Its main focus is assembly, storage, and shipment. You don’t have to necessarily rent out a bunch of spaces within this one building. Instead, usually, only one business takes the majority of the space.
Furthermore, we’re in desperate need of industrial properties. While ecommerce stocks may not be doing very well, online and overnight shipping has become the way the world works. We need more storage and shipping at fast rates, and that isn’t going to slow down any time soon.
Therefore, if you’re looking for an undervalued TSX stock, this is the place to look. Not only do we need industrial properties now, we’ll continue to need them in the near and distant future. So it’s a solid long-term hold. And this is the one I’d choose right now.
Nexus Industrial REIT
The Nexus Industrial REIT (TSX:NXR.UN) is an undervalued TSX industrial REIT. It currently trades at just 5.3 times earnings, offering a low-risk option for those seeking passive income. And it has plenty to go around.
Nexus stock currently offers a dividend yield at 6.65% as of writing. That comes out to $0.64 per share annually, dished out on a monthly basis. Since coming on the market, shares have increased by 25% as of writing, but have fallen by 25% in the last year alone. So it’s an excellent time to scoop it up for a steal.
And it really is a steal. Despite the current market conditions, the company continues to bring in stable revenue from lease agreements, and has been taking advantage of the lower valuations for further acquisitions. That’s also why you haven’t seen any dividend increases yet, as the company continues to use funds to pursue more opportunities.
Really, Nexus REIT is in its early days, even though it has been around since 2014. There is so much room to grow, and I’m sure we’ll see that happen as investors continue to pick up the undervalued TSX stock.
Bottom line
I’ll end with this. The reason I would pick up this stock now comes down to the difference in passive income between buying today and buying at 52-week highs, which you can see below.
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY | TOTAL INVESTMENT |
| NXR.UN – highs | $14.03 | 713 | $0.64 | $456.32 | monthly | $10,000 |
| NXR.UN – today | $9.55 | 1,047 | $0.64 | $670.08 | monthly | $10,000 |
As you can see, you’ll get over $200 more in annual passive income from the same $10,000 investment made now, as compared with 52-week highs. That is why now is a great time to consider this undervalued TSX stock.
