15 Best Real Estate Stocks In Canada for December 2023

In Canada (like in most other countries), more people invest in real estate than in any other asset. That’s because homeownership is a form of real estate investment as well.

But investing in real estate directly can be quite expensive for most retail investors, and real estate stocks offer a more financially feasible option.

Many people don’t consider investing in real estate stocks instead of real estate, but its an intriguing option.

Here are some of the best real estate stocks in Canada to get you started.

Real Estate Stocks vs. REITs

Before we discuss real estate stocks in earnest, it’s important to make one distinction: the term real estate stocks is NOT synonymous with REITs. Real Estate Investment Trusts or REITs are an industry within the real estate sector, i.e., a subset.

But REITs tend to attract more investor attraction compared to other real estate stocks, primarily because they allow investors more direct exposure to the real estate as an asset class than other real estate companies.

Another reason why REITs get so much love from investors is their generous dividend structure and monthly payouts, making them an ideal source of passive income.

Buying into a REIT is effectively like becoming a landlord without all the responsibilities and with a much, much lower cost barrier to entry.

Still, REITs are still just a portion of the real estate sector as a whole. The sector offers a decent and diverse variety of holdings. And we can stretch the real estate stock pool if we borrow an overlapping industry/business segment from the financial sector, i.e., mortgage companies.

Why Invest In Real Estate Stocks In Canada?

For dividend investors, the real estate sector might offer a richer pool of individual assets compared to tech, but dividends aren’t the only thing that defines the strength of the real estate sector. There are other factors to consider as well:

1. The underlying asset: Real estate is easily the most popular investment asset in Canada. Millions of Canadians become investors by buying real estate. It’s tangible, as solid as a hard asset can potentially be, and few investment assets can match the stability real estate offers. Real estate stocks offer you exposure to this asset class often in ways that (depending upon the stock you are investing in) enhance its characteristic strengths.
2. An active market: Real estate is made up of two thriving segments: Residential and commercial, and there is almost always a lot of activity. When people are buying property more actively, it triggers revenue generation and activity in other industries like mortgage, construction, insurance, etc. There is also a significant rental market that’s almost always thriving. Properties change hands frequently in both commercial and residential realms. And since housing is one of the core necessities, the market almost always remains active, so someone is usually always making money.
3. A diverse sector: The two main segments, i.e., residential and commercial, are quite independent. Within the commercial sector, you might see the retail segment suffering due to the e-commerce boom, but at the same time, light industrial, logistics, and warehousing properties (and businesses associated with these real estate classes), which are part of the commercial real estate, are rapidly growing.
4. Growth and dividend combination: Many growth-oriented real estate stocks also offer a decent yield, making them multipurpose and ideal for both dividend and growth investors.

There are reasons not to invest in real estate stocks as well. The relatively slow pace, very few dividend investors in the sector, dividend slashes more common than other sectors (usually in REITs), etc., are just a few reasons you may consider for not investing in real estate stocks.

15 Best Real Estate Stocks In Canada

Every investor’s definition of best might be slightly different, but three core things that investors usually look for are growth prospects, dividends (yield, stability, growth potential, etc.), and risk/volatility.

The risk is associated with both capital appreciation prospects that a stock has to offer and dividends.

• FirstService (FSV.TO)
• Altus Group (AIF.TO)
• Colliers International Group (CIGI.TO)
• Tricon Residential (TCN.TO)
• Timbercreek Financials (TF.TO)
• MCAN Mortgage (MKP.TO)
• Real Matters (REAL.TO)
• SmartCentres REIT (SRU-UN.TO)
• Granite REIT (GRT-UN.TO)
• Canadian Apartment Properties REIT (CAR-UN.TO)
• Inovalis REIT (INO-UN.TO)
• True North Commercial REIT (TNT-UN.TO)
• Slate Grocery REIT (SGR-UN.TO)
• Automotive Properties REIT (APR-UN.TO)
• NorthWest Health Properties REIT (NWH-UN.TO)

Non-REIT Real Estate Stocks

1. FirstService Stock

FirstService is a real estate services company that has two business divisions. One is a residential property management business that covers 8,500 properties (over 1.7 million individual units) in both Canada and the US.

The other is essential property services which cater to both residential and commercial properties. It’s one of the best real estate stocks in Canada because:

• It’s a powerful and consistent growth stock that has been on a bull run practically since inception.
• It’s a dividend aristocrat, and even though the yield is low, it grows its payouts quite generously (almost 49% growth in the last five years).
• The financial growth is keeping pace with the stock growth.
• Despite relying heavily on real estate, the stock is not as exposed to property values as most other real estate stocks are.

2. Altus Group

Altus is a software and consultancy company that caters to the commercial segment of the real estate market. It offers custom software and data solutions to different stakeholders in Commercial Real Estate (CRE) and has over 7,000 customers around the globe.

Its business basically relies on the activity in the real estate market, i.e., the more active players there are in the commercial sector, the more business it’s likely to conduct. Stock highlights:

• Decent overall growth potential, albeit at a relatively higher price.
• CRE-orientation and nature of business (software) shelter it from potential housing market crash.
• Low yield and no dividend growth.

3. Colliers International Group Stock

Another growth stock in the real estate sector is Colliers International. It’s listed on the NASDAQ as well and is an investment management and consultancy company with about $45 billion worth of assets under management and operations in 66 countries. A few things about the stock:

• A strong international presence and diverse business operations make it safer and more stable despite its high beta.
• Powerful long-term growth potential.
• Strong financials.
• Almost non-existent dividend yield.

4. Tricon Residential

If you are looking for direct exposure to the real estate asset and residential market, Tricon Residential is a good option outside the REIT realm. It owns over 33,000 single-family and multi-family homes in North America (the US portfolio is the most extensive) and is a service-oriented landlord.

A few things you need to know about Tricon are:

• The CAGR is skewed because of the post-crash growth momentum. It’s not a very consistent growth stock in general.
• The yield is relatively high, and the payout ratio is stable. But the company has only grown its dividends once in the last five years.
• The price is usually quite fair.
• It offers direct exposure to the real estate market, which is good when the market is thriving (like now) but a liability if the housing market crashes.

5. Timbercreek Financials Stock

Timbercreek Financials offers loans to CRE investors, so we can count it among the best real estate stocks in Canada, even though it’s from the financial sector. To shareholders, it offers generous dividends and safety of capital by generating loans primarily for income-producing CRE.

• The yield is among the best the TSX has to offer, but don’t expect any dividend growth.
• The stock is usually quite stable but also slow to recover.
• Financials are stable.
• Minimal capital appreciation potential.
• It is fairly valued at the time of writing this.

6. MCAN Mortgage Stock

MCAN is a federally regulated mortgage investment corporation, giving it official weight. Its generous yield (that’s backed by a powerfully stable payout ratio) lands it a place among the best real estate stocks in Canada.

It caters to residential and commercial properties, and the bulk of its portfolio comprises two segments: single-family mortgages and construction loans. The stock is worth considering for several reasons.

• Government backing might make this more stable than other private corporations.
• The yield is overly generous, despite the fact that the stock is trading near its all-time high.
• Long-term capital appreciation potential is decent, especially at its current undervalued state, but the growth is quite erratic.

7. Real Matters

Even though it’s a part of the real estate sector, its primary domain would be technology. It provides services and solutions to mortgage lenders and insurers within the real estate sector. The company generates most of its revenue from the US (titles and appraisals) and only a fraction from Canada.

• It offers indirect exposure to the real estate sector (through tech and services).
• Its growth potential, while highly erratic, is quite enormous. It grew well over 800% in less than two years (between 2019 beginning and its 2020 spike).
• A heavy US presence shelters it from local real estate sector problems.

These seven are some of the best real estate stocks in Canada that are not exactly REITs. However, REITs offer a relatively wider variety, especially when it comes to dividends.

Also, for REITs, the Funds From Operations or FFO payout ratio (or Adjust FFO payout ratio) is a better indicator of the financial viability of dividends than the payout ratio.

REIT Real Estate Stocks

8. SmartCentres REIT Stock

SmartCenter has a portfolio of 168 shopping centers, 115 of which are anchored by Walmart, which makes the REIT’s tenant profile quite attractive. The REIT is also expanding into urban city centers and uniquely designed communities that offer a more fulfilling standard of living.

• SmartCentres is an aristocrat with a very attractive yield and a stable payout ratio.
• The capital appreciation potential is low, but it’s available at a fair price.
• The REIT is stable and diverse and is focusing on reshaping its portfolio and switching away from a relatively troubled asset class, i.e., brick-and-mortar retail.

9. Granite REIT Stock

Granite operates an international portfolio (seven countries) of 118 commercial properties with a decent occupancy ratio (99.6%). Apart from geographic diversification, its major strength is its portfolio, two-thirds of which (by asset value) comprises of distribution/e-commerce properties.

• Granite offers a powerful combination of capital appreciation potential, dividends, and stability.
• Its international portfolio, made up of an attractive asset class, ensures a bright long-term future.
• The stock is financially stable.
• It’s an aristocrat with a modestly attractive yield at a fair price.

10. Canadian Apartment Properties REIT Stock

With a market capitalization of $10.5 billion, CAP REIT is the largest REIT in the country and manages over 65,000 apartment and townhouse suites in Canada as well as two countries in Europe. It’s a growth-oriented REIT with brutally stable dividends (thanks to the FFO) and an impressive footprint.

• The growth history is consistent and decently paced.
• Dividends are safe, and you can lock in a better yield by buying this REIT when it dips.
• It’s heavily invested in the housing market, so vulnerable to a housing crash. However, the rental income might stay safe even if property prices drop.

11. Inovalis REIT Stock

If you are looking for 100% international real estate, Inovalis is one of the “purest” options. It has a completely European portfolio with office properties in Germany and France.

• Before the crash, the REIT offered slow but consistent capital appreciation.
• It offers a mouthwatering yield, albeit at risky financials.
• The financials are not rock-solid.

The reason this REIT is on the list of best real estate stocks in Canada despite not having the right characteristics is that it hasn’t slashed its payouts so far and even offered a special dividend in June 2021, despite the tough financial situation.

12. True North Commercial REIT Stock

True North Commercial is another REIT that has shown amazing resilience when it comes to dividends and has maintained its payouts even though the FFO payout ratio has entered dangerous territory.

It has 45 commercial properties in five provinces (most in Ontario). The occupancy ratio is heartening (97%), and three-fourths of the tenant portfolio is made up of government or credit-rated tenants.

• The REIT offers modest capital appreciation potential at a fair price.
• The portfolio is stable from both tenant and geography perspectives.
• The yield is quite high and sustainable, despite the high payout ratio.

13.  Slate Grocery REIT Stock

Slate Grocery has a US-based Grocery-focused portfolio, and since groceries, as the basic necessity (food), is a business that thrives regardless of the market conditions (to an extent), Slate Grocery REIT is quite safe.

It has 106 properties in 23 US states, 98% of which are grocery-anchored.

• Very high and sustainable yield at an undervalued price.
• A safe and reliable asset class that can survive market crashes and pandemics.
• Almost no capital appreciation potential.

14.  Automotive Properties REIT

Automotive Properties REIT is what you might call a niche REIT since it focuses on a niche real estate segment, i.e., automotive dealerships. That’s a strength since it means little competition and more power within the market segment, and a liability thanks to its heavy reliance on the automotive industry.

But in a few years, a lot of activity is expected to take place within the automotive sector as more people switch from conventional vehicles to green ones, and this transition will continue for at least a decade or so.

• Powerful combinational of dividends and capital appreciation potential.
• The yield is quite high at a stable payout ratio.
• A decent national footprint.

15.  NorthWest Health Properties REIT

Another niche REIT that deserves a place among the best real estate stocks in Canada is NorthWest, which has a diversified portfolio of 189 income-producing properties (including clinics, offices, hospitals, etc.) spread out across three continents.

• Focuses on an evergreen industry, i.e., health.
• A decent combination of dividends and growth potential.
• It is currently trading at a very affordable price.

There are several other REITs that deserve to be counted among the best real estate stocks in Canada, but the eight stated above, plus the seven other real estate stocks, will give you a decent exposure to the sector. For a more spread out and diversified exposure to the sector, you might consider REIT ETFs.

Canadian REITs to Avoid

Even though real estate stocks in general and REITs in particular, offer a decent selection of safe and rewarding stocks, there are certain assets that you should try and avoid, at least for the foreseeable future. Two of the most prominent ones are:

American Hotel Income Properties REIT

The REIT’s valuation has been in a steady decline for the last five years, and the 2020 market crash only expedited the situation. The REIT is still trading at a price that’s over 40% down from its pre-pandemic valuation. And that’s just the stock’s poor performance.

The financials have just now started to recover, and the total debt the REIT carries is almost three times the entire market capitalization. And it doesn’t pay any dividends. The beta is 2.93 (one of the highest) in the sector. There are more reasons to not buy the company and very few in its favour.

Firm Capital Apartment REIT

Unlike the REIT above, this one isn’t a fundamentally bad choice, but it’s not a very smart buy right now. The market capitalization of $60 million makes it a microcap, and it offers relatively little for the high valuation it trades on.

It’s also engaged in a relatively dangerous business segment, i.e., mortgage debt investment (along with the more typical investments in income-producing properties).

How To Buy Real Estate Stocks In Canada

The cheapest way to buy stocks is from discount brokers. My top choices in Canada are:

To learn more, check out my full breakdown of the best trading platforms in Canada here.

Conclusion

Many investors are attracted to real estate as an asset class, but the barrier to entry and the more active investor role (as a landlord and a portfolio owner) keep a lot of investors at bay.

Real estate stocks are the next best thing, so it’s worth having a look.

Don’t want to pick your own stocks? Check out the best REIT ETFs in Canada.