Because the primary motivation for any investor to invest in a stock is to earn a high return, no stone should be left unturned in the search for profitable stocks and exchange-traded funds (ETFs). Many novices would scorn real estate investment funds, yet this often-ignored industry could be the most profitable, stable, and long-term in terms of profitability, stability, and sustainability.
For Canadians wishing to diversify their financial portfolios, real estate investment trusts (REITs) are a wonderful option. REITs provide liquidity, monthly income, and the possibility for capital growth as a pool of real estate assets traded on a stock exchange.
However, with so many options, choosing the best REIT can be tough. It can be exhausting to spend so much time analyzing financial reports. There’s also no guarantee that your particular selection will perform well. This is precisely why even many experienced investors are not interested in REITs, but if you are willing to allow for high-risk investments, high profits might follow.
5 Canadian REIT ETF You Should Invest In
For Canadian investors, here are 5 REIT ETF that promise big earnings and long-term stability.
BMO Equal Weight REITs Index ETF (TSX:ZRE)
The BMO Equal Weight REITs Index ETF aims to mirror the performance of an equal weight Canadian REITs index, net of fees, to the greatest degree practicable. The fund’s current goal is to match the performance of the Solactive Equal Weight Canada REIT Index. For more than 11 years, BMO Exchange Traded Funds has been a prominent ETF provider in Canada, with over 100 strategies, a 25% market share, and $80.6 billion in assets under management.
Since its inception in 2010, ZRE has invested in 23 REITs, ranging from large-cap corporations like Milestone Apartments REIT (MST-UN.TO) to smaller real estate organizations like Crombie REIT (CRR-UN.TO). The ETF invests very equally in these stocks, with the highest weighting of a single position being 5.09 percent. ZRE has exposure to six industries, including diversified, office, residential, industrial, retail, and health care, in addition to distributing its assets across a wide range of diversified REITs. Retail and residential properties (each accounting for 22% of the portfolio), as well as diversified and industrial REITs, dominate the sub-sector (about 18 percent each). BMO promises a dividend yield of 3.472%.
Trading at $28.71 as of March 23, 2022 (8:16 AM), the company holds a market capitalization of 863,278,119. The P/E ratio of 8.40 and a dividend of 0.09 CAD (paid per share monthly) further add to the profitability of this REIT ETF.
Vanguard FTSE Canadian Capped REIT Index ETF (TSX:VRE)
The fund aims to mimic the performance of a broad Canadian real estate equity index, which measures the return on capital of publicly traded securities in the Canadian real estate sector, to the extent practicable and before fees and expenses. This Vanguard ETF currently aims to replicate the FTSE Canada All Cap Real Estate Maxed 25% Index. It primarily invests in the stocks of real estate companies in Canada.
Vanguard manages global assets over USD 8.2 trillion (CAD 10.5 trillion), with approximately USD 2.1 trillion (CAD 2.4 trillion) in global ETF assets (as of November 30, 2021). Vanguard has offices throughout the world, including the United States, Canada, Mexico, Europe, Australia, and Asia. To its more than 30 million investors globally, the company offers 421 funds, including ETFs.
Vanguard has a one-of-a-kind management system. The Vanguard Group Inc. is owned by Vanguard’s US-domiciled funds and ETFs. Unlike companies that are publicly traded or owned by a small group of people, Vanguard is owned by the clients that own those funds. Trading at $37.60 as of March 23, 2022 (12:28 PM), it is the largest REIT and its future seems bright. This REIT ETF pays a monthly dividend of 0.094 CAD per share further adding to the profitability of the stocks.
CI Canadian REIT ETF (TSX:RIT)
RIT’s investment goal is to achieve long-term total investment returns, including a steady income and long-term capital gain, through an actively managed portfolio that largely consists of stocks of Canadian REIT ETF, REOCs, and organizations that provide real estate-related services. Foreign securities may account for up to 30% of the Fund’s assets.
The CI Canadian REIT ETF has $814 million in assets and a 0.61 percent MER. CI Global Asset Management was honored with 38 FundGrade A+® Awards, which are given out by Fundata Canada Inc. every year to recognize Canadian investment funds that have consistently performed the best risk-adjusted returns over the course of a calendar year.
The company promises a dividend yield of 3.783%, paying a monthly dividend of 0.068 CAD per share. Trading at $21.25 as of March 23, 2022 (12:44 PM), this REIT ETF will see further success in the coming months. The P/E ratio of 7.90 adds to the profitability of this real estate investment trust.
Summit Industrial Income REIT (TSX:SMU.UN)
Summit Industrial Income REIT is an unincorporated accessible trust that invests in and manages light industrial properties in Canada. Summit’s units are traded on the Toronto Stock Exchange under the ticker symbol SMU.UN. The Trust is active in commercial real estate leasing, with properties in Ontario, Western Canada, Quebec, and Atlantic Canada. The company focuses on the Canadian real estate industry’s light industrial sector.
Summit Industrial Income REIT has announced that it would acquire a 76,423 sq ft Class A single-tenant property in Greater Toronto Area after waiving requirements. Summit will pay $25.2 million for the property, which is substantially below replacement cost and yields a 4.25 percent going-in capitalization rate. The project is planned to be completed by the end of April 2022.
The company promises a dividend yield of 2.434% and pays a monthly dividend of 0.047 CAD. The earning per share for this REIT ETF is 6.65. Trading at $23.06 as of March 23, 2022 (12:54 PM), the company holds a market capitalization of 4,091,728,674. Presently, it has an optimum P/E ratio of 3.50, making it the best time to invest in this ETF.
Purpose Real Estate Income Fund (TSX:PHR)
Purpose Investments is an asset management firm that oversees over $14 billion in assets. Purpose Investments is a client-centric investing firm that offers a variety of regulated and quantified investment options. Purpose Investments is a part of Purpose Unlimited, an autonomous technology-driven financial institution run by well-known entrepreneur Som Seif. The fund’s objectives are to provide long-term capital growth to shareholders by investing in a portfolio of real estate-focused equity securities listed on major North American exchanges and mitigate the risk of rising interest rates regarding real estate equity securities by strategic and tactical hedging of the portfolio’s duration.
The company provides a dividend yield of 3.448%, paying a monthly dividend of 0.072 CAD per share. Trading at $24.82 as of March 23, 2022 (1:06 PM), the company has a bright future ahead of it. It has a high P/E value of 9.20, one of the best among Canadian REIT ETF. The current market capitalization for this ETF stands at 24,199,500.
Why You Should Invest in REIT ETF in Canada
REITs have historically provided investors with above-average dividend income and capital growth, resulting in good overall returns. Meanwhile, ETFs make it simple to invest in the REIT industry by giving investors broad exposure to the most popular REITs. While most REIT ETFs have similar holdings, the best ones each have their own distinct flavor, giving investors a variety of outstanding options. Retail REITs, Residential REITs, Healthcare REITs, Office REITs, and Mortgage REITs are all covered under the name of REIT ETFs.
Individual investors may find exchange-traded funds (ETFs) that specialize in real estate investment trusts (REITs) to be a good fit: They can gain broad exposure to various portfolios of properties rapidly and inexpensively without having to enter into long contractual partnerships, take out mortgages, or come up with considerable funds as is the case with mutual funds. Canadian REIT ETFs, which have been around for 20 years, is a good option for those seeking more exotic pastures. Aside from the conventional benefits, these funds are very liquid, trading on the Toronto Stock Exchange (TSX), and they offer attractive yields, with monthly dividends.
REIT dividends are often substantially larger than the average stock on the S&P 500 because REITs are mandated to pay out 90% of taxable income to shareholders. This is the biggest advantage of REITs that they provide the safety and profitability of mutual funds with the possibility of intra-day trading.
The Bottom Line
It can be difficult for new investors to know where to begin with more than 200 publicly-traded REITs concentrating on a dozen different property industries. ETFs can aid in this situation. These companies own a variety of REITs and other real estate stocks, giving investors a broad view of the industry. Anyone who seeks to depend upon a diversified portfolio for passive income, even individual REITs can be enough as the property prices are constantly on the rise. But with the available ETFs, there is no reason to be unsuccessful.
Harvest Global REIT Leaders Income ETF is an actively managed large-cap REIT portfolio in major mature markets. The goal of an ETF is to provide a monthly income stream that matches the potential for future growth. They use a call option hedging strategy to increase their annual income, similar to ordinary call options sold by investors and backed by the underlying securities.
It is a passive investment made up of shares of leading Canadian real estate investment funds, and most of them pay monthly dividends. Like some other REIT ETFs in Canada, RIT invests in non-REIT companies such as real estate and services. However, the fund’s two holdings are slightly different: XRE invests in real estate services such as FirstService Corp (FSV) and Colliers Internaitonal Group Inc (CIGI).
Canadian REIT ETFs provide attractive investment attributes for real estate investing as they invest in multiple real estate companies simultaneously. One of the best Canadian REIT ETFs is the best investment choice, and many investors who want to learn how to invest in stocks and real estate flock to them. If you’re going to invest in real estate but can’t afford to invest directly in real estate or build a diversified REIT portfolio, a REIT ETF might be the right place to start.
There are two main ways to get in and start investing in some of these ETFs. First, investors can access the real estate sector as a whole without having to deal with day-to-day real estate management by investing in these types of ETFs instead. Investing through ETFs guarantees that investors own dozens of REITs per investment at a reasonable price.
They can achieve this in two ways: either by directly investing in real estate and earning a regular income in the form of rent or by lending funds to developers, in which case the profit comes from the interest on these loans. REITs must generate 75% of their income from investment properties and distribute 90% of that income to shareholders, hence their high returns, which income investors love.
Best REIT ETFs In Canada
REITs are commonly used to diversify and generate income in long-term investment portfolios. Investors invest in REITs to generate revenue from a diversified portfolio and their excellent distribution since REITs must payout at least 90% of their income in the form of distribution (the difference between distribution and dividends). In addition, REIT and ETF stocks provide some of the best monthly dividend payouts. REITs are also popular with high-income investors as they usually have high dividend yields.
Fortunately, some tremendous exchange-traded funds (ETFs) track the REIT industry. Despite being a relatively new investment product, exchange-traded funds (ETFs), along with index funds, have a sizable market share. As a result, many real estate investors prefer investing through exchange-traded funds because of their low cost, convenience, and diversification, rather than trying to sort through individual REITs. In addition, REIT ETFs provide broad access to domestic and foreign commercial and residential real estate markets, pooling investors’ funds and diversifying their real estate purchases, allowing investors to avoid the idiosyncratic risks of local real estate markets inherent in owning real estate.
The Vanguard FTSE Canadian Capped REIT Index ETF (VRE.TO) guarantees exposure to small, mid-cap and large Canadian real estate companies at a low cost, even with an ETF: expense ratio of 0.35%. Since its inception in February 2012, VRE has accumulated $246.23 million in assets under management. VRE tracks the FTSE Canada All Cap Real Estate Capped 25% Index, which holds stakes in numerous Canadian real estate companies.
CGRE’s second holding is Tricon Residential Inc.; a Toronto-based residential rental company focused on serving the mid-sized population in North America. The ETF also owns REIT Allied Properties, which has data center resources. Mr. Varghese favours the CI Global REIT Private Pool ETF (CGRE-T), given its mix of data centers and residential holdings, two real estate sectors expected to do well in a hybrid world.
Its operations are located in Canada, and the industry’s distribution is primarily made up of four types of REITs: real estate (22.2%), retail (21.4%), residential (17.7%) and office (17.3%). Commercial and residential real estate (22% each of the portfolio) and diversified and industrial REITs (18% each) dominate at the sub-sector level. Residential and retail REITs were the most notable at 24.7% and 24.6%, respectively, while industrial REITs came in third (20.7%). Unlike the first two ETFs, IShares’ busiest sector is retail, which makes up nearly 30% of the fund, followed by residential REITs at 29%.
The ETF has 50 underlying holdings, and resident REITs win the weighting game by a healthy margin. Like VRE, the iShares REIT ETF has a leading position, with its top 5 participants accounting for almost 50% of its total assets. They have half of their holdings in the top 5 assets, making them not diversified enough for an ETF. Looking at Vanguards VRE and iShares XRE, it’s hard to justify any of these funds as the best ETF REIT in Canada when they’re so heavy.
Other benefits this REIT ETF offers Canadian investors include its large size, reaching $1.329 billion in assets under management, and overall liquidity. REIT’s holdings are more balanced than other ETFs, with the top three companies, Canadian Apartment Properties, Choice Properties and Allied Properties, holding close to 10%. This ETF selects REITs with strong growth, solid balance sheets, low debt levels, and sustainable payout ratios. In addition to the usual benefits, these funds are highly liquid, traded on the Toronto Stock Exchange (TSX) and offer attractive returns with monthly payouts.
With REIT ETFs, you can invest in a wide range of low-cost real estate: ETFs can be bought and sold like stocks on the stock market, and like stocks, companies that create and manage ETFs must provide information to the audience to help you decide if it is a good investment.