Join +750K new investors every month who copy stock picks from billionaire's portfoliosSign Up Free

3 Niche REITs for Stable Dividend Income

Published 2021-12-01, 02:50 p/m
3 Niche REITs for Stable Dividend Income
REIT
-

When it comes to investing in dividend stocks that can maintain their dividends consistently for a relatively long time (ideal dividends), one thing you should look into is the competitive advantage of the company and the competitive landscape of the industry it’s in. It’s an area where industries/companies that cater to a niche market are usually at a distinct advantage.

With that in mind, three REITs that cater to a specific class of real estate that you might consider adding to your dividend portfolio for the competitive advantage they offer.

Niche asset: Senior housing Senior housing and nursing homes are a relatively stable market segment, which gives Chartwell Retirement Residences (TSX:CSH.UN) its edge. The company operates over 185 residences in four provinces composed of about 25,000 suites.

As an owner and operator of these properties, Chartwell is technically more than just a typical REIT, that is, focused only on the real estate aspect of these properties, but since these properties are the backbone of its portfolio, we can count it among the ranks.

It’s currently offering a decent yield of 5.27%, but its valuation severely undermines the attractive yield and the fact that it’s a Dividend Aristocrat. Its capital appreciation potential has been non-existent for the last five years, which is a pattern that might stick around.

Niche asset: Automotive properties Automotive Properties REIT (TSX:APR.UN), as the name suggests, focuses on a very specific real estate asset class: automotive properties. And the company, thanks to its contracts with some of the most stable vehicle manufacturers in the world, can be reasonably sure about the consistency of its rentals. Like most other retail properties, location is quite important for automotive dealers, which results in long-term leases.

This reflects in the weighted average lease term of the REIT (11.9 years). The REIT is currently offering a juicy 5.9% yield, and the payout ratio is quite stable as well (29.5%). The portfolio is split into three groups, though two of them make up the bulk of the NOI: mass market and luxury, while ultra-luxury only makes up about 6.2% of the NOI. This division seems quite healthy.

Niche asset: Grocery-anchored properties Slate Grocery REIT (TSX:SGR.U) has a portfolio that’s 100% anchored by grocery properties. Grocery, while too “mainstream” to be called a niche asset class within real estate, has some distinct advantages, the primary being that grocery stores are businesses that survive and thrive even during economically challenging times.

Slate Grocery is headquartered in Canada, but the portfolio is completely U.S.-based. The current yield is a mouthwatering 8%, and the payout ratio is at 49.1%. At this yield, the REIT can offer you $100 a month in dividend income with just $15,000 invested. And thanks to the stability of the underlying asset, the REIT might be able to sustain its already financially stable payouts for the foreseeable future.

Foolish takeaway All three REITs focus on commercial real estate and focus on a specific CRE asset class. If you try to look for similar niche REITs within the residential real estate sector, you might be disappointed. REITs are some of the most favourite dividend stocks for Canadian investors for their yield and frequency, and you can add to their desirability with dividend sustainability.

The post 3 Niche REITs for Stable Dividend Income appeared first on The Motley Fool Canada.

Fool contributor Adam Othman has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends AUTOMOTIVE PROPERTIES REIT.

This Article Was First Published on The Motley Fool

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.