Tag Archives: TSX:NWH.UN

The Best 3 Places To Look For Safe Dividend Income

If history gives a hint about the future, it indicates that companies in certain industries tend to generate stable earnings or cash flows that lead to stable dividends.

If we choose the quality companies from these industries, we can then build a diversified portfolio that generates a secure, growing income stream. Below, I list some possibilities.

Utilities: A Must-Own Sector

Earnings generated by utilities are relatively stable because people need to use electricity, gas, and water, etc. no matter if the economy is doing well or not.

One utility that came out strongly from the last recession was Brookfield Infrastructure Partners L.P. (TSX:BIP.UN)(NYSE:BIP). Since 2009 it has been a five-bagger.

Brookfield Infrastructure is a rock solid utility, which owns and operates a global, quality portfolio of infrastructure assets, including toll roads, railroads, ports, pipelines, and telecom towers.

Its trusted management, Brookfield Asset Management (TSX:BAM.A)(NYSE:BAM), employs value investing and actively recycles mature assets for higher returns. Because management owns 30% of the partnership, retail unitholders can expect the management to be unitholder-friendly.

Indeed, Brookfield Infrastructure has increased its distribution every year since 2009. Going forward, it gives the guidance to grow its distribution by 5-9% per year. Currently, it offers a yield of 4.5% to start.

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My Rental Income from 7 Canadian REITs

Many people like to receive rent from properties. On the other hand, I don’t want to manage properties or spend time keeping good relationships with tenants. Instead, I like to sit back and receive passive rental income from my Canadian REITs.

My Canadian REIT portfolio of 7 companies that make up roughly 12% of my dividend portfolio. Yet, they contribute close to 22% of my portfolio income.

I first go over my highest yielding Canadian REITs that offer income of 9% or higher. Then, I talk about the less risky REITs with yields of 4-6%.

By analyzing my Canadian REIT income portfolio, we can probably learn something. Here it goes!

REITs Provide Good Income

The first thing to note is that my Canadian REIT portfolio generates 22% of the income in my dividend portfolio even though it only makes up 12% of my portfolio value. That seems to indicate that distributions is a major part of REIT returns.

Well, it’s true that many REITs, including 4 of my REIT holdings yield 9% or higher right now.

Canadian REIT Portfolio Allocation

I analyzed my REIT portfolio in terms of their allocation according to market value, as well as income allocation. And I will talk about each Canadian REIT later on in the article as well.

My Canadian REIT allocation by value and by income

Source: Author

You’d notice that 28% of my Canadian REIT portfolio is Plaza Retail REIT (TSX:PLZ.UN), and it also contributes to 22% of my Canadian REIT income. I’m comfortable with the concentration in Plaza Retail REIT because of its track record and growth potential.

Northview Apartment also has a good track record of maintain distributions. However, its properties are mostly located in resource provinces. So, it is a good income play, but should only be bought when its yielding around 9% at historical highs.

The other Canadian REITs add diversification to the REIT income stream. Looking at the industry or asset class allocation, it looks pretty balanced with residential REITs making up almost one-third of the pie. That’s fine because everyone needs to live somewhere. If you’re not buying, you’re renting. Read More

Which Account to Best Buy REITs In?

Where is the Best Place to Buy REITs?

REITs or real estate investment trusts allow you to easily invest in real estate for rental income. You can buy residential REITs, retail REITs, healthcare REITs, office REITs, etc. Generally, REITs pay out high income called distributions. However, they are different from stocks that pay out dividends.

Investors generally buy REITs for their high income. But investors need to consider where to buy high-yield REITs to avoid as much tax as possible for the high income. That is, to buy in a non-registered, TFSA, or RRSP account. First, we need to gain a better understanding of REIT distributions.

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How are REIT Distributions Different from Stock Dividends?

REIT distributions may consist of other income, foreign non-business income, capital gains, and return of capital. Other income and foreign non-business income are taxed at your marginal tax rate, while capital gains are taxed at half your marginal tax rate.

However, the return of capital portion is not taxed until the adjusted cost basis goes to negative. If you buy a Canadian REIT in a non-registered (taxable) account, the T3 you receive will help you determine how much to deduct from the adjusted cost basis for the year.

Where to buy Canadian REITs?

Because the return of capital part of the distribution reduces the adjusted cost basis, investors should consider buying REITs with a big percentage of return of capital in the distribution in the non-registered account. Read More