Are you about to retire? You are probably looking to generate monthly revenue to support your retirement. In general, dividend-paying stocks will pay a quarterly dividend. However, some Canadian companies are paying monthly distributions. Since most of them are Real Estate Income Trusts (REITs), we created this list of all monthly distribution REITs.
What Makes REITs great monthly payers?
As most companies prefer to keep cash in their account and wait to pay shareholders at the end of the quarter, many Canadian REITs have opted for a monthly distribution structure.
Imagine that you purchase a rental property. Every month, you would receive payments from tenants, making up a perfect monthly revenue source, right? Well, REITs are structured the same way, except they own several properties with several tenants. Since they receive a monthly cash flow stream, they share the wealth and pass the money along to unitholders.
Monthly Distribution REITs List
At DividendStocksRock, we track over 1,000 dividend-paying stocks. Only 79 Canadian companies pay a monthly dividend from this list, and half of them (40) are REITs. Here is the complete list of all monthly distribution REITs.
Our Top 3 Monthly REITs
Some of the best Canadian REITs are paying a monthly distribution. Here are some of our favorites:
Granite REIT (GRT.UN.TO)
Market Cap: $4.4B
Dividend Yield: 4.50%
Sub-Sector: Industrial
GRT used to be an extension of Magna International (MG.TO). In 2011, Magna represented about 98% of its revenues. It is now down to 28% as at August 2022 (with Amazon as its second-largest tenant with 5% of revenue). Management has transformed this industrial REIT into a well-diversified business without adversely affecting shareholders. GRT now manages 127 properties across 7 countries. Each time we review this stock card, the number of properties increases while the exposure to Magna Intl reduces. The REIT also boasts an investment grade rating of BBB/BAA2 stable. With a low FFO payout ratio (around 77%), shareholders can enjoy a 3%+ yield that should grow and match or beat the inflation rate. This is among the rare REITs exhibiting AFFO per unit growth while issuing more units to finance growth.
Dividend Growth Perspective
GRT has maintained a solid dividend growth policy over the past 5 years (4%+ CAGR). With its FFO payout ratio well under control shareholders should expect a mid single-digit dividend growth rate going forward. The company even paid a special dividend in 2019. In fact, if the Magna International business is doing well, GRT will perform and keep increasing its dividend. We issued a buy rating on Granite a while ago. It’s still a buy, especially considering the latest price drop!
Killam Apartment REIT (KMP.UN.TO)
Market Cap: $1.75B
Dividend Yield: 4.50%
Sub-Sector: Residential
KMP’s current business model ensures a modest but steady cash flow trend, as rent increases by 1.8% per year, on average. We like the monthly distribution that follows inflation and protects income-seeking investors’ buying power. With many new projects in Ontario and Nova Scotia, KMP plans on providing shareholders with additional growth in the next few years. The apartment suites were mostly located in Nova Scotia (34%), Ontario (23%), New Brunswick (20%), and Alberta (8%). Geographic diversification aids KMP in achieving stable and reliable results quarter after quarter. KMP is the perfect example of a “boring is good” business.
Dividend Growth Perspective
Management is increasing its monthly distribution carefully and managed to bring its AFFO payout ratio back from 123% in 2013, to an acceptable level of 76% for the full year of 2021. The REIT has been able to improve its payouts due to strong same-property performance and continuous acquisitions. In the meantime, the distribution is tracking inflation with a roughly 2% growth rate over the past 5 years. The latest increase in 2021 was of 3%. Shareholders can expect to match inflation going forward as the REIT payout ratios are under control.
Canadian Net REIT (NET.UN.V)
Market Cap: $137M
Dividend Yield: 5.10%
Sub-Sector: Diversified
This is an interesting small REIT that has flown under the radar. Canadian Net REIT enjoys stable cash flows from its properties under the triple net lease formula (tenants handle insurance, taxes, and maintenance costs). Triple net lease REITs let tenants manage more risk as they handle all expenses involving the property. The REIT has high-quality tenants such as Loblaws (25% of NOI), Walmart (11%), Sobeys (10%), Suncor (7%) and Tim Hortons (6%). The REIT’s portfolio makes this company quite resilient to any kind of recession. We got a good idea of how NET fared during the 2020 lockdowns as its revenue continued to increase. The bulk of its properties are situated in the province of Quebec, with a small number in Ontario and the Maritimes.
We should keep in mind that the company trades on the TSX Venture. This small-cap (under $150M of market capitalization) is subject to low trading volume and strong price fluctuations. Follow this one quarterly to make sure the situation remains stable.
Dividend Growth Perspective
Don’t be alarmed by the dividend drop in 2018, as the REIT simply changed its payment schedule. In fact, this small-cap has been continually increasing its dividend since its IPO in 2011. Their FFO payout ratio is maintained between 55% and 65% as their FFO per unit grew just as quickly as its dividend in the past decade (in fact, it grew even faster). In other words, the dividend is safe and will continue to increase. NET increased its dividend by 12% in 2021, giving investors a glimpse of what to expect. Bear in mind that the distribution is a mix of dividend and return of capital, depending on the year. An investor should make sure to visit their investors’ websites before investing. This remains a small-cap stock subject to high fluctuations in price per share.
Those REITs are great, but there is more!
We are now in market correction territory, and the fear of losing more money is growing. What will happen if we keep up with continuous high inflation?
If you look at past performances, Real Estate Income Trust is one of the best performing classes during high inflation periods since the 70s. Unfortunately, not all REITs are created equal and you must do adequate research to make sure you buy the right ones.
In this webinar, I will answer questions like:
- How about REITs paying a 10% yield
- How to make sure the REIT’s distribution is safe
- Which metrics to consider during my analysis?
- Should I consider mortgage REITs?
