In today’s inflationary environment, real estate investment trusts (REITs) are useful investment options to boost your regular income. Besides the juicy dividends, most Canadian REITs pay monthly dividends.
A $10,000 investment can turn into monthly income similar to rental income from direct ownership in investment properties. You can receive more than $50 monthly by investing in H&R (TSX:HR.UN) and Primaris (TSX:PMZ.UN). Their dividend yields are more than 6%.
Simplified business model
H&R is one of Canada’s largest landlords. The $2.6 billion REIT made a strategic move in 2021 and is making another one this year. In December 2021, the shareholders voted to spin off H&R’s entire enclosed mall portfolio and concentrate on multi-residential and industrial properties.
The result is Primaris, which is now Canada’s only enclosed shopping centre-focused REIT. Management said the move was a transformational strategic repositioning plan to simplify the business model and create significant value and growth for unitholders.
On February 20, 2024, H&R announced the creation of Lantower Residential Real Estate Development Trust, a real estate development trust (REDT). The plan is to sell REDT units through an initial public offering (IPO) and raise $52 million. Lantower Residential is H&R’s subsidiary, and REDT is a partnership on two residential development projects in Florida.
H&R’s executive chairman and chief executive officer, Thomas J. Hofstedter, said. “The creation of the REDT is expected to maximize value both for H&R REIT and the REDT. This strategic initiative positions H&R’s development pipeline well for the future.” He added that REDT, as a new capital source, will enhance financial capacity and enable H&R to acquire it eventually.
In 2023, rental from investment properties and net operating income (NOI) rose 1.5% and 2.2% year over year to $847.1 million and $546.6 million. At year-end, the occupancy rate was 96.5% compared to 93.7% in mid-year 2021. Rental growth was highest in the residential (18.7%) and industrial (12.5%) property portfolios.
Hofstedter noted the substantial progress of H&R’s strategic plan over the last 30 months. The REIT displayed resiliency amid a challenging economic environment and volatile capital and real estate markets. The transformation into a simplified growth-oriented company is almost complete. This real estate stock trades at $9.35 per share and pays a 6.45% dividend.
Significant runway for growth
Primaris went public on January 5, 2022, or the year when inflation rose and peaked at 8.3% in June. The inflation reading in January 2024 is down to 2.9%. If you invest today, the share price is $13.72, while the dividend offer is 6.12%. This $1.32 billion REIT impressed investors with its full-year 2023 results.
In the 12 months ending December 31, 2023, rental revenue and cash NOI increased 14% and 17.7% to $113.8 million and $56.5 million versus 2022. The investment properties increased from 35 to 39, while committed occupancy was 94.2%.
Its president and chief operating officer, Patrick Sullivan, said that given the good business performance, there’s a significant runway for internal growth in the coming years. He added that Primaris enjoys several competitive advantages, including partnerships with retailers on multiple location leasing deals.
Strategic initiatives
H&R’s spin-off of its retail properties resulted in a simplified business model. It also produced a REIT to capitalize on a recovering industry and growing mid-sized, high-growth markets.
