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Pedestrians head for work among the highrise buildings at Spadina Avenue and Bremner Boulevard in Toronto. Investors can tap into the growth of commercial real estate – retail, office and rental properties – through REITs, real estate investment trusts.
Pedestrians head for work among the highrise buildings at Spadina Avenue and Bremner Boulevard in Toronto. Investors can tap into the growth of commercial real estate – retail, office and rental properties – through REITs, real estate investment trusts.
(Fred Lum/The Globe and Mail)

Why REITs could be in for a stellar 2014

The dividend yield on the S&P/TSX Real Estate Investment Trusts Index is currently 420 basis points higher than the five-year Government of Canada bond yield. Based on these relative yields, regression analysis predicts a return close to 12 per cent for REIT investors in the coming year.

For REITs, the “yield over Canadas” – the amount by which the REIT distribution yield exceeds government bond yields – is an essential component of performance. REITs are most attractive and perform best in periods like 2009 and 2010 when the distribution yield is well above bond yields.