TFSA Investors: 3 REITs to Own for High Cash Flow on Low Rental Yields


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Is the housing market close to a fall in the first quarter of 2022? Royal Bank of Canada chief economist Robert Hogue thinks otherwise. He said, “The Canadian housing market is not about to collapse. Although it is cooling down a bit, industry experts and other economists are still expecting considerable activity this year due to supply shortages and unmet demand.

On the investor side, buying investment properties right now may not be a good idea. Prices have skyrocketed and even potential buyers are leaving. It no longer makes sense to have large mortgage debts.

Invest in stocks instead of real estate

Tidefall Capital President Trevor Scott is aware of the stock market risks, but he would invest in stocks rather than buy a house in Canada. He said, “The advantage of Canadian equities today is their high free cash flow yield relative to interest rates.” Scott added that it’s the opposite of real estate, where rental yields are at record highs. Thus, the rental is attractive.

Tax-Free Savings Account (TFSA) investors with short- or long-term goals may consider using their 2022 contribution limits or limits to purchase real estate investment trusts (REITs). The asset class continues to gain popularity due to generous dividends. Three real estate stocks are top picks if you want higher income streams.

High and stable occupancy rates

Northwest Health Properties (TSX:NWH.UN) is more than a reliable passive income provider. It’s the only REIT in the spa business, so the rental business is expected to last for years, if not decades. The $2.92 billion REIT owns and operates healthcare real estate infrastructure such as medical office buildings, hospitals and clinics.

In addition to Canada, income-producing properties are found in Australia, Brazil, New Zealand and Europe. Indexed leases with prime tenants or hospital operators are long-term. Currently, NorthWest enjoys a high and stable occupancy rate. At $13.41 per share, the dividend yield is 5.97%.

Solid fundamentals

Industrial Dream (TSX:DIR.UN) is a solid investment prospect, due to the rise of e-commerce and the ever-increasing demand for high-quality industrial properties. This $3.68 billion REIT owns and operates 326 industrial properties in Canada, the United States and Europe. At just $16 per share, you can participate in the 4.37% dividend.

Operating profit and net profit have steadily increased from 2018 to 2020. Management has yet to report results for 2021, although run rates are extremely higher than in the year former. Thanks to the solid fundamentals of industrial real estate, Dream maintains secure cash flows every year.

Inovalis is a pure income stock for its ultra-high dividend yield of 8.34%. At $9.88 per share, the one-year price return is 23.32%. This $315.26 million REIT focuses on office properties in France and Germany. While total revenue has grown steadily, net income fell 50.1% in 2020 compared to 2019 due to the fallout from the global pandemic.

Management expects revenue and net income figures to improve significantly in 2021. Year-over-year net income growth is estimated at 101%. According to the president of Inovalis, Stéphane Amine, its well-defined strategy is showing the first signs of success. Outside of France and Germany, the REIT could look for attractive investment opportunities in Spain.

Follow inflation

Earning tax-free passive income through the TFSA is a must in 2022 if you want to keep up with inflation.


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