Signs of consistently easing inflationary pressures allowed the Bank of Canada to lower interest rates by 25 basis points in June 2024, marking its first rate cut in over four years. In its latest meeting held in July, the Canadian central bank cheered stock investors by continuing to ease its monetary stance and slashing interest rates by another 25 basis points as it looked to support economic growth.
These moves are likely to benefit real estate investment trusts (REITs) in the future as lower borrowing costs could improve their profit margins and give them access to more capital for investments. These are some of the key reasons why REITs, which distribute a large portion of their income to investors as monthly dividends, could see higher profitability and increases in their dividend payouts. Considering this, it could be the right time for long-term investors seeking passive income to add REITs to their portfolios.
In this article, I’ll highlight two fundamentally strong Canadian REITs you can buy now to expect regular monthly passive income and healthy returns on investments in the long run.
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Canadian Apartment Properties REIT stock
Canadian Apartment Properties REIT (TSX:CAR.UN), or CAPREIT, is one of the largest publicly traded REITs in Canada based on its market cap of around $8.6 billion. It primarily focuses on acquiring and managing residential properties across Canada, including rental apartments, townhomes, and manufactured home communities.
After rallying by nearly 19% over the last two months, CAPREIT stock currently trades at $51.30 per share. While its annualized dividend yield of 2.9% may not seem very high at first, it’s supported by consistent rental income from a diversified property portfolio, which tends to be quite stable.
In the quarter ended in June 2024, CAPREIT’s revenue inched up by 5.4% YoY (year over year) to $278.1 million with the help of higher rents from new acquisitions and organic growth within its existing property portfolio. Similarly, its net operating income for the quarter climbed by 7.2% YoY to $186.3 million with improved margins. Moreover, its continued focus on reducing operating costs and maintaining high occupancy rates brightens CAPREIT’s long-term growth outlook, making its stock really attractive to buy now.
Dream Industrial REIT stock
Dream Industrial REIT (TSX:DIR.UN) is another quality REIT that long-term investors can consider right now. As its name suggests, it primarily focuses on industrial properties, a sector that may also witness strong demand after recent rate cuts. Dream Industrial currently has a portfolio of 339 industrial assets across Canada, Europe, and the U.S., with a gross leasable area of around 71.9 million square feet.
This REIT has a market cap of $3.7 billion as its stock trades at $13.38 per share after rising 8.8% over the last two months. At this market price, it offers an attractive 5.2% annualized dividend yield.
In the second quarter, Dream Industrial REIT leased over 500,000 square feet across development projects, while its net rental income surged by 5.6% YoY to $87.7 million. Overall, the industrial REIT’s robust development pipeline, ongoing capital-recycling strategy, and strong financial position make its stock an appealing choice for income-focused investors.
