2 Top REITs You Can Buy and Hold Forever

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Revise Real Estate Investment Trust REIT in Dual Exposure Business Background.

Over the past three years, the real estate sector has seen an annual income growth of 27%. However, real estate investment trusts (REITs) have only grown their returns by an average of 7.6% per year. This indicates that many of these REITs are highly efficient and are compensating investors accordingly.

Not all REITs are created equal. There is considerable variation across trusts from a sector perspective, geographical orientation and risk profile. In my view, industrial and residential real estate are sub-sectors centered on urban metropolises.

Here are two REITs that fit into these categories that I would put in the “always buy and hold” bucket.

Dream Industrial REIT

DREAM INDUSTRIAL REAL ESTATE INVESTMENT TRUST (TSX:DIR.UN) has been my top pick for quite some time. The trust focuses on high quality industrial properties (warehouses and distribution centers) located near major metropolitan city centers. Thus, as the e-commerce boom continues, the demand for warehouse space close to buyers will continue to drive up prices.

This REIT has been on a downtrend since early 2021, mostly due to rising interest rates. However, as the Bank of Canada signals that rate hikes will be on hold from here, REITs are starting to bid. I think it’s a belief like that that’s worth tracking as a rebounding candidate.

Additionally, fund manager GIC and Dream Industrial REIT acquired Summit Industrial Income REIT in an all-cash deal. Unitholders of Summit will receive $23.50 per unit in cash upon the special distribution and redemption of units. A limited partnership ownership structure has 90% for GIC and 10% for DIR.

The REIT has the highest dividend yield in its peer group (over 5%) and trades at around $13, which is quite cheap compared to its peers.

Canadian Apartment REIT

Canadian Apartment REITÂ (TSX:CAR.UN) released its most recent quarterly earnings report on November 8. The report missed expectations, with earnings per share (EPS) coming in at 36 cents (EPS of 62 cents) for the quarter. Revenue of $252 million didn’t excite investors.

This REIT has the highest quality portfolio of residential properties in the market. The Trust’s management team also excels in business, growing in unique ways compared to its peers.

The REIT’s monthly dividend distribution of 12.1 cents per share is noteworthy as it provides regular monthly income to investors. For retirees, such income is welcome to cover expenses. In fact, while 3% is nothing to write home about, CAPREIT has consistently raised its distribution over its history.

Analysts at Raymond James issued their EPS forecasts for CAPREIT shares for the first quarter of 2024. For the quarter, Raymond James expects earnings per share of $0.59. Analysts have issued forecasts for CAPREIT’s Q2 2024, Q3 2024, and Q4 2024 earnings at $0.66, $0.67, and $0.63, respectively. These numbers suggest stable returns in the year ahead – something investors should be looking for in this uncertain environment.

Position 2 of the Best REITs You Can Ever Buy and Hold appeared first Motley Fool Canada.

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Further reading

Stupid contributor Chris McDonald No position in any of the shares mentioned. The Motley Fool recommends Dream Industrial Real Estate Investment Trust. A motley fool Disclosure Policy.


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