Best REIT ETFs in Canada for Optimized Growth and Income in 2021

Benefits of Investing in Global and Local REIT ETFs

Best REIT ETFs in Canada

Do you enjoy owning a slice of the best properties in Canada, Europe, Asia, or the US? I heard “YES”. How? By buying REIT stocks or one of the Best REIT ETFs in Canada. REIT ETFs are the awesome tools to simplify ownership and exposure to real estates in Canada and around the world.

Owning a Canadian listed REIT ETF provides the ability to part-own apartments, shopping malls, business parks, or any other type of property all over the world in a simple and diversified method. In addition, REIT stocks and ETFs come with some of the best monthly payments in form of dividends.

In this post, I am going to share the best REIT ETFs listed on TSX in our local CAD currency to avoid any complication or extra foreign exchange fees. REET is an option if you enjoy holding US listed equities.

Related: Every investor should consider investing in technology for a balanced income and growth portfolio. Find out about the 5 Best Technology ETFs in Canada

Best REIT ETFs in Canada

Below is the REIT ETFs chart as a reference. Every fund is explained briefly to give an understanding of its holdings. All below ETFs are in Canadian Dollar and listed on Toronto Stock Exchange (TSX).

ETFMERDistributionYield (After MER)Regions1 y Return3 y Return5 y Return
CGR0.71%$0.09601.36%Global13.11%4.14%2.96%
HGR1.36%$0.04584.86%Global19.92%2.96%NA
PHR0.78%$0.07203.39%US & Canada27.37%8.27%4.79%
REIT0.51%$0.07503.52%Canada31.14%6.47%NA
RIT0.97%$0.20253.59%Canada27.65%8.22%9.20%
VRE0.38%$0.08782.79%Canada34.01%5.46%6.68%
XRE0.61%$0.04202.18%Canada28.42%6.31%7.04%
ZRE0.61%$0.09003.87%Canada35.34%9.58%10.55%
Best REIT ETFs in Canada Comparison Chart

Related: Check out my list for Best & Most Tax Efficient US & International ETFs listed on TSX

CGR iShares Global Real Estate Index ETF

CGR is a global REIT ETF with a diversified portfolio around the world and an exposure to 75 publicly-traded global real estate companies. However, 60.70% of its exposure is in the US.

CGR ETF Market Value
CGR Market Value

One disadvantage of CGR is that it pays unequal quarterly dividends with a current annual yield of 2.07%. Based on current numbers, the after MER annual pay yield is 1.36%.

CGR Distributions
CGR Distributions

HGR Harvest Global REIT Leaders Income ETF

HGR is an actively managed portfolio of large-cap REIT companies in key developed markets, to provide access for Canadians to a variety of Global REITs. The ETF is designed to provide a consistent monthly income stream with an opportunity for growth. In order to generate an enhanced monthly distribution yield, an active covered call strategy is engaged.

HGR currently holds 29 companies. Biggest exposure is unexpectedly the US at 59%. It pays a very interesting $0.0458 per share dividend which makes its after MER annual yield 4.86%.

HGR Holdings and Allocations
HGR Holdings and Allocations

PHR Purpose Real Estate Income Fund

A diversifying source of income and growth linked to a broad portfolio of high-quality real estate assets. This ETF selects REITs with solid growth, strong balance sheets, low debt, and sustainable payout ratios. As of April 9th, it holds 55% US and 40% Canada real estate equities.

PHR Hodgins and Allocations
PHR Hodgins and Allocations

After deducting the MER, PHR pays 3.39% income from a diversified US and Canada portfolio.

REIT Invesco S&P/TSX REIT Income Index ETF

REIT seeks to replicate the performance of the S&P/TSX Capped REIT Income Index, or any successor thereto. REIT’s holdings are more balanced than other ETFs with its highest 3 companies, Canadian Apartment Properties, Choice Properties, and Allied Properties with an almost equal 10% weight.

REIT Holdings
REIT Holdings

The after MER annual yield is 3.52% with its current monthly $0.0750 dividend payment per share.

RIT First Asset Canadian REIT Income Fund

RIT seeks long-term total returns consisting of regular income and long-term capital appreciation from an actively managed portfolio comprised primarily of securities of Canadian real estate investment trusts, real estate operating corporations and entities involved in real estate related services.

Holdings
RIT Holdings

RIT currently holds 91.26% Canadian companies with a small 8.68% foreign exposure and an after MER annual dividend pay of 3.59%.

VRE Vanguard FTSE Canadian Capped REIT Index ETF

VRE tracks the performance of a broad Canadian real estate equity. Currently, it holds 15 stocks and similar to XRE, its biggest exposure is Canadian Apartment Properties CAR.UN at 15.35%.

VRE Holdings
VRE Holdings

VRE pays a monthly $0.087805 per share dividend. After MER annual yield pay is 2.79%.

XRE iShares S&P/TSX Capped REIT Index ETF

XRE provides long-term capital growth by replicating the performance of the S&P/TSX Capped REIT Index, net of expenses. XRE pays a monthly dividend of $0.042 per share which was reduced from previously $0.052 per share. After MER annual dividend yield is 2.18%.

XRE Distributions
XRE Distributions

Currently, it holds 20 companies with its biggest exposure being Canadian Apartment Properties CAR.UN at 15.50%.

XRE Hodgins
XRE Hodgins

ZRE BMO Equal Weight REITs Index ETF

ZRE invests in Canadian real estate investment trusts in the same proportion as they are reflected in the Index. ZRE currently holds 23 Canadian stocks and pays a monthly $0.09 per share dividend. Its annual yield payout after MER deduction is 3.87%.

ZRE Holdings
ZRE Holdings

The Best Canadian REIT ETF Winner – ZRE

ETFMERDistributionYield (After MER)Regions1 y Return3 y Return5 y Return
REIT0.51%$0.07503.52%Canada31.14%6.47%NA
RIT0.97%$0.20253.59%Canada27.65%8.22%9.20%
VRE0.38%$0.08782.79%Canada34.01%5.46%6.68%
XRE0.61%$0.04202.18%Canada28.42%6.31%7.04%
ZRE0.61%$0.09003.87%Canada35.34%9.58%10.55%
Canadian REIT ETFs Comparison Chart

From the five listed Canadian REIT ETFs, I eliminate XRE or VRE due to their low annual yield.

Comparing RIT, VRE, and REIT shows they all have an almost similar after MER yield. Looking at 3 and 5 years return, RIT return is lower than ZRE. Hence, I remove RIT from the competition.

We have 2 final REIT ETFs to choose from. ZRE versus REIT. In my opinion, ZRE is a better choice due to its higher yield, higher return, and more trading volume. Hence, I recommend buying ZRE for your REIT portfolio.

ZRE versus REIT
1 Year Return ZRE (Yellow) Versus REIT (Blue)

The Best International REIT ETF Winner – HGR

ETFMERDistributionYield (After MER)Regions1 y Return3 y Return5 y Return
CGR0.71%$0.09601.36%Global13.11%4.14%2.96%
HGR1.36%$0.04584.86%Global19.92%2.96%NA
PHR0.78%$0.07203.39%US & Canada27.37%8.27%4.79%
International REIT ETFs Comparison Chart

It is a bit challenging to find international REIT ETFs listed on TSX. However, the above gives enough exposure and diversity. From the 3 ETFs, I won’t consider PHR because it includes over 40% of Canadian market which we are already covering with ZRE.

HGR is an actively managed ETF which utilizes covered call options strategy. Covered call is used as a tool to generate income. Harvest writes covered call options to a maximum of 33% on any position. This strategy generates high yield and allows participation in the long-term growth.

Theoretically using this strategy will cut the growth return by 33%. This explains why HGR had an average 1.18% lower yearly return comparing to CGR. However, we won’t have the full picture without counting in the dividends.

Below is a simplified comparison including after MERs Yield plus Annual Return. Based on the Total Yearly Average numbers, HGR is surprisingly the winner.

  • HGR Yield + Annual Return (3 Years) = 7.82%
  • CGR Yield + Annual Return (3 Years) = 5.5%
  • HGR Yield + Annual Return (1 Year) = 24.78%
  • CGR Yield + Annual Return (1 Year) = 14.47%

I am personally buying HGR but you can opt to buy them both side by side.

CGR versus HGR comparison
1 Year Return CGR (Yellow) Versus HGR (Blue)

Final Thoughts and Recommendations

Buying ZRE and HGR offers a great global REIT exposure with high returns. Hopefully, REIT market around the world keeps recovering slowly leading to even higher returns.

I personally own Canadian REIT stocks directly as I like the control and higher dividends without paying MER. For the Global REIT market, I keep adding HGR to my portfolio. One word of caution is that both HGR and CGR have low liquidity (lower trading volume) which leads to a gap between their Market and NAV value.

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For example, today April 12th, CGR closed down by $0.03 at $29.33 while its NAV value was up $0.07 to $29.45. These kind of gaps can be ignored considering these REIT ETFs are meant to be held for a long time.

It is your turn! Do you own any REIT ETFs? What is your favorite?

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