Looking for investing ideas? Here’s your weekly digest of the Globe’s latest insights and analysis from the pros, stock tips, portfolio strategies plus what investors need to know for the week ahead.
This 8.2% yielding ETF is ideal for Canadian REIT investors wanting to expand their horizons
Canadian real estate investment trusts have done very well this year, Gordon Pape writes. So far in 2019, the S&P/TSX Capped REIT Index is up more than 16 per cent. But you don’t need to limit your horizons to your home country. REITs in other parts of the world are also doing well, thanks in large part to falling interest rates.
Consider the Global X Superdividend REIT exchange-traded fund. It invests in 30 of the highest yielding REITs in the world. The overwhelming majority of these (87 per cent) are in the United States, with the rest spread among France, Australia and the Netherlands. Here are the details.
Read more: Sorry Canadians, but your stay-at-home approach to investing isn’t as logical as you may think
REITs and utilities are the champion asset classes of the past 20 years
Through all the stock market ups and downs of the past 20 years, the best-performing asset classes for Canadian investors have been real estate investment trusts and the utility sector, Rob Carrick writes. It’s almost shocking how much better these two sectors have done in comparison with much riskier corners of the market.
REITs produced average annual total returns of 11.8 per cent for the 20 years to July 31, according to data published by PWL Capital (the firm’s monthly data tables are a great online resource). Utilities gained an annualized 9.4 per cent. The only other asset class with comparable 20-year gains was the U.S. REIT market, at 10.2 per cent on an annualized basis.
More from Rob Carrick: Worried about currency fluctuations hurting your investment returns? Here’s what - and what not - to do
Investors, don’t give up on the Big Six
Canadian bank stocks have failed to generate any meaningful gains over the past two-and-a-half years, but don’t give up on them now, David Berman writes. Dividend yields are above 4.6 per cent on average for the Big Six bank stocks, making the quarterly payouts hard to ignore at a time when bond yields are falling. Plus, the banks’ third-quarter results, which rolled out at the end of August, suggest that these financial giants are doing okay even in challenging times – making the stocks looking curiously cheap.
Read more: CEO invests approximately $250,000 in this Big 5 bank stock
Why the stars may be realigning for a TSX stock that has returned 41% annually over the past 13 years
At Constellation Software Inc.’s annual general meeting in the spring, CEO Mark Leonard joked about how the company’s stock was worth an “infinite amount,” Tim Shufelt writes. It was a bit of math humour based on the company growing faster than its own cost of capital, but it raised a legitimate question: What are the limits to Constellation’s growth?
Since going public in 2006, its shares have risen by more than 9,400 per cent, which translates into an average annual growth rate of 41 per cent. Low and falling interest rates have fuelled an investor frenzy for growth stocks in general, and for software stocks in particular, pushing up valuations on hot names such as Constellation.
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What REIT ETF is right for me?
A reader holds the iShares S&P/TSX Capped REIT Index ETF (XRE) and wants to increase exposure to Canadian REITs: “Should I buy more XRE or diversify and purchase another ETF such as VRE or ZRE?”
John Heinzl responds: Real estate investment trusts own income-producing assets such as shopping centres, offices, industrial buildings, apartments or – in many cases – a mix of property types. The beauty of REIT ETFs is that they give you exposure to a basket of REITs and a diverse portfolio of properties across the country with a single investment. Assuming you don’t already have ample REIT exposure – I usually aim for about 10 per cent to 15 per cent of my equity portfolio – diversifying your REIT holdings is probably a good call.
Depending on your comfort level and how much capital you have available, you may wish to consider owning individual REITs instead of REIT ETFs. You’ll pay brokerage commissions on your initial (and subsequent) purchases, but you will eliminate the MER that REIT ETFs charge on a continuing basis.
More from John Heinzl: The Yield Hog model dividend growth portfolio as of Aug. 31, 2019
What investors need to know for the week ahead
Economic data on tap in the week ahead include: U.S. consumer credit for July (Monday); Canadian housing starts for August and building permits for July (Tuesday); Canada’s capacity utilization for the second quarter, U.S. wholesale trade for July and producer price index for August (Wednesday); Canada’s new housing price index fro July and U.S. inflation figures for August (Thursday); U.S. retail sales for August and business inventories for July (Friday).
Companies releasing their latest earnings include Hudson’s Bay, Aurora Cannabis, Roots, Dollarama and Empire Co.
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