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What are we looking for?

North American real estate investment trusts with attractive yields, valuations and better-than-average price performance.

The U.S.-listed Real Estate Select Sector SPDR Fund (XLRE) has been under pressure since the start of the coronavirus pandemic as offices and retail units struggle to pay rents amid lockdowns. But is the worst over? The fund is up 4.2 per cent over the past week, making real estate the top performing sector in the S&P 500 over this period. This comes as investors look to put money into higher-yielding assets after U.S. Federal Reserve chair Jerome Powell said the central bank is not even thinking about raising rates “until we’re very confident that the turmoil from the pandemic and the economic fallout are behind us.”

The screen

We will be using Trading Central Strategy Builder to search for North American REITs with high distribution yields, attractive valuation levels and a year-to-date performance that is better than the sector average.

We will start by screening for REITs with a market capitalization of $1-billion or more. To find REITs with attractive income properties, we will screen for distribution yields of 3 per cent or more. To ensure we focus on REITs with reasonable valuations, we will filter based on price-to-book ratios of 1.5 or less and P/Es that are less than the average P/E of both the S&P 500 and S&P/TSX Composite Index, which are currently at 24.3 and 21.4 respectively.

More about Trading Central

Trading Central is a global leader in financial market research and investment analytics for retail online brokers and institutions. Trading Central’s product suite provides actionable trading ideas based on technical and fundamental research covering stocks, exchange-traded funds, indexes, forex, options and commodities. Strategy Builder is available through leading retail brokers in Canada and worldwide.

What we found

Only eight North American REITs met the strategy criteria and all are Canadian-listed.

Topping our list is Northview Apartment REIT, one of Canada’s largest publicly traded multifamily real estate investment trusts. It has the best one-year and year-to-date performance on our list at 27.8 per cent and 17.3 per cent, respectively. Considering how much pressure most of the REITs have been under since the start of the coronavirus pandemic, it’s also worth noting that Northview is within 5.8 per cent of its record price high of $36.70.

Second on our list is Granite REIT, a global industrial property trust that is the only company on our list that also has a U.S. listing (GRP.U-NYSE). The company has the second-best price performance on our list. Granite’s largest tenant is auto parts manufacturer Magna International Inc., which accounts for the majority of Granite’s lease income.

The highest yielding REIT on our list, at 7.2 per cent, is Northwest Healthcare Properties REIT. The company provides investors exposure to health care real estate in a diversified portfolio of 175 income-producing properties across Canada, Brazil, Germany, Australia and New Zealand.

The investment ideas presented here are for information only. They do not constitute advice or a recommendation by Trading Central in respect of the investment in financial instruments. Investors should conduct further research before investing.

Select North American REITs

RankReal estate investment trustTickerMkt. Cap. ($ Bil.) Dist. Yld. (%)P/BP/EYTD Perf. (%)1Y Perf. (%)Recent Price ($)
1Northview Apartment REITNVU-UN-T2.44.71.29.117.327.834.68
2Granite REITGRT-UN-T4.43.81.311.215.924.776.50
3Dream Industrial REITDIR-UN-T1.76.40.96.6-16.5-9.610.81
4Northwest Healthcare Prop. REITNWH-UN-T2.07.21.39.8-6.5-5.311.00
5Choice Properties REITCHP-UN-T4.05.81.212.4-8.1-6.912.60
6Summit Industrial Income REITSMU-UN-T1.64.71.17.9-3.6-11.011.69
7Killam Apartment REITKMP-UN-T1.73.91.05.8-8.6-11.717.15
8Allied Properties REITAP-UN-T5.23.90.96.7-19.5-14.341.15

Source: Trading Central

Gary Christie is head of North American research at Trading Central in Ottawa.

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