A couple notes: I am not comparing ALL REITs because there are 17 in the TSX composite index. I didn’t realize that REITs fall into the Financial sector. When I compared financial stocks, there were a few financial corporations that I missed. 2011 and 2012 seem to have been unreasonably profitable years for REITs, which reduces my confidence in future projections. Current earnings are generally positive, and REITs are generally a defensive investment, which makes them unlikely to be under-priced (except for the recent market correction).

Artis REIT

Symbol: AX.UN on the TSX. The price at Monday close was $11.99, which is near the 52-week low of $11.59 (undervalued). (Chart) The price is -4.46% lower than last week’s price ($12.55), and -22.29% lower than the price one year ago ($15.43). The current yield is 8.77%, which is near the 10 year average of 8.69% (fairly valued). The P/E ratio is 27.27, above the 10 year average of 12.56 (overvalued). The Price/Book ratio is 0.68, below the 10 year average of 0.82 (undervalued). Market capitalization is $1.62B (mid cap).

Earnings per share have fluctuated, but it’s reasonable to think they’ll reach the prior high. I think the shares should reach $14.33 within the next five years (the 52-week high was $13.84), which would represent a 19.5% increase, plus an annual dividend of 8.77%. Over a 5-year time frame, that’s 12% CAGR.

Cominar REIT

Symbol: CUF.UN on the TSX. The price at Monday close was $14.21, which is near the 52-week low of $13.70 (undervalued). (Chart) The price is -3.14% lower than last week’s price ($14.67), and -27.05% lower than the price one year ago ($19.48). The current yield is 10.26%, which is above the 10 year average of 7.73% (undervalued). The P/E ratio is 8.60, below the 10 year average of 12.69 (undervalued). The Price/Book ratio is 0.66, below the 10 year average of 1.05 (undervalued). Market capitalization is $2.34B (mid cap).

Earnings per share have grown pretty steadily, but price hasn’t moved in sync, so I’m only willing to guess that the price will reach $15.25 within the next five years (the 52-week high was $20.11), which would represent a 7.32% increase, plus an annual dividend of 10.26%. Over a 5-year time frame, that’s 12% CAGR, most of which will come from the dividend, if it is maintained.

Dream Global REIT

Symbol: DRG.UN on the TSX. The price at Monday close was $8.06, which is near the 52-week low of $7.70 (undervalued). (Chart.) The price is -6.71% lower than last week’s price ($8.64), and -14.62% lower than the price one year ago (9.44). The current yield is 9.93%, which is above the 10 year average of 6.00% (undervalued). The P/E ratio is 4.31, below the 10 year average of 17.93 (undervalued). The Price/Book ratio is 0.83, below the 10 year average of 1.49 (undervalued). Market capitalization is $909.85M (small cap).

This REIT did quite well over 2012, 2013 and 2014, but it doesn’t have a 10-year history, so I’m only willing to guess that the price will reach $10.45 within the next five years (the 52-week high was $10.45), which would represent a 29.7% increase, plus an annual dividend of 9.93%. Over a 5-year time frame, that’s 15% CAGR.

Dream Office REIT

Symbol: D.UN on the TSX. The price at Monday close was $15.41, which is near the 52-week low of $15.04 (undervalued). (Chart) The price is -8.60% lower than last week’s price ($16.86), and -43.37% lower than the price one year ago ($27.21). The current yield is 14.40%, which is above the 10 year average of 8.40% (undervalued). The P/E ratio is 265.26, above the 10 year average of 5.37 (overvalued). The Price/Book ratio is 0.48, below the 10 year average of 0.91 (undervalued). Market capitalization is $1.71B (mid cap).

Earnings per share have fluctuated. I think the shares should reach at least $22.00 within the next five years (the 52-week high was $28.50), but only if that sky-high dividend can be sustained. That would represent a 43% increase, plus an annual dividend of 14.40%. Over a 5-year time frame, that’s 21% CAGR.

Pure Industrial REIT

Disclaimer: I’ve owned this in the past and it’s been very profitable for me.

Symbol: AAR.UN on the TSX. The price at Monday close was $4.21, which is near the 52-week low of $4.12 (undervalued). (Chart) The price is -2.77% lower than last week’s price ($4.33), and -16.63% lower than the price one year ago ($5.05). The current yield is 7.36%, which is near the 10 year average of 6.89% (fairly valued). The P/E ratio is 5.7, below the 10 year average of 14.24 (undervalued). The Price/Book ratio is 0.93, below the 10 year average of 1.00 (undervalued). Market capitalization is $786.57M (small cap).

Earnings per share have grown fairly consistently. I think the shares could reach $7.00 within the next five years (the 52-week high was $5.25), but note that it has rarely traded outside of a range of $4.00 – $5.00. That would represent a 66% increase, plus an annual dividend of 7.36%. Over a 5-year time frame, that’s 18% CAGR.

RioCan REIT

Symbol: REI.UN on the TSX. The price at Monday close was $22.97, which is near the 52-week low of $22.14 (undervalued). (Chart.) The price is -1.84% lower than last week’s price ($23.40), and -20.87% lower than the price one year ago ($29.03). The current yield is 6.15%, which is below the 10 year average of 7.27% (overvalued). The P/E ratio is 14.92, above the 10 year average of 11.51 (overvalued). The Price/Book ratio is 0.93, below the 10 year average of 1.50 (undervalued). Market capitalization is $7.24B (large cap).

Earnings per share have grown, but in lumps. I think the shares could easily reach  $25.00 within the next five years (the 52-week high was $26.79). That would represent a 8.84% increase, plus an annual dividend of 6.15%. Over a 5-year time frame, that’s 7.7% CAGR.

Conclusion

None of these potential investments provide a guaranteed return. Further, they are all Real Estate Investment Trusts, which means that they will probably experience similar risks and benefits from external economic conditions. Having said that, there are some good opportunities here and an investor could benefit from picking two or three to add to a portfolio. For stability and future income, I would choose RioCan, PIRET and Artis. For greater growth potential, I would add Dream Office, although I’m nervous about the possibility of a dividend cut, especially if the economy drags down business leases and increases the vacancy rate.

Comparing Canadian REITs

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