Go to the Globe and Mail homepage

Jump to main navigationJump to main content

Globe Investor

Inside the Market

Up-to-the-minute insights
on developing market news

Entry archive:

Those seeking to avoid exposure to market meltdowns by investing in trade volatility for scrutiny. (Kevin Van Paassen/The Globe and Mail)
Those seeking to avoid exposure to market meltdowns by investing in trade volatility for scrutiny. (Kevin Van Paassen/The Globe and Mail)

RBC reveals its 8 favourite REITs for 2013 Add to ...

Investors in real estate investment trusts had little to complain about in 2012, with the sector boasting returns of 16 per cent – more than double the broader returns of the TSX.

But after four consecutive years of outperforming, is it time for investors to take profits?

RBC Dominion Securities doesn’t think so. But it also believes investors won’t be treated to quite those heady returns again as earnings growth begins to lighten up. It forecasts total returns from Canadian REITs of 10 per cent this year, with several trusts likely to continue to increase distributions.

More Related to this Story

Valuations may seem lofty, at about 18 times AFFO (adjusted funds from operations, a key ratio for REITs that measures a real estate company’s available funds generated by operations). That’s only about eight per cent from the all-time high. But RBC analysts, led by Neil Downey and Michael Markidis, contend the valuations aren’t anything to be alarmed about given property values and credit conditions.

That said, RBC warns the operating and acquisition environment is unlikely to get any easier for REITs over the next several years. So it’s important for investors to focus on quality at a reasonable price, putting the onus on them to seek out REITs with the best prospects.

Specifically, Mr. Downey and Mr. Markidis suggest investors seek out names that have have “institutional quality” property portfolios, longer-term track records, a well-defined investment strategy and lower financial leverage and payout ratios.

Among 30 TSX-listed REITs that RBC covers, it likes these eight the best. All have “outperform” ratings:

Allied Properties REIT (Price target $36)

Calloway REIT (Price target $33)

Canadian Apartment Properties REIT (Price target $27)

Canadian REIT (Price target $47)

Dundee REIT (Price target $43)

Granite REIT (Price target $41)

H&R REIT (Price target $27)

Morguard REIT (Price target $20)

Follow on Twitter: @eyeonequities

 
  • AP.UN-T
  • CWT.UN-T
  • CAR.UN-T
  • REF.UN-T
  • D.UN-T
  • GRT.UN-T
  • HR.UN-T
  • MRT.UN-T
Live Discussion of AP.UN on StockTwits
More Discussion on AP.UN-T
Live Discussion of CWT.UN on StockTwits
More Discussion on CWT.UN-T
Live Discussion of CAR.UN on StockTwits
More Discussion on CAR.UN-T
Live Discussion of REF.UN on StockTwits
More Discussion on REF.UN-T
Live Discussion of D.UN on StockTwits
More Discussion on D.UN-T
Live Discussion of GRT.UN on StockTwits
More Discussion on GRT.UN-T
Live Discussion of HR.UN on StockTwits
More Discussion on HR.UN-T
Live Discussion of MRT.UN on StockTwits
More Discussion on MRT.UN-T

More Related to this Story

For Globe Unlimited Subscribers

Business videos »

Most popular videos »

Highlights

Most Popular Stories