BMO Canadian ETF Dashboard

— as of November 30, 2018 —

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Trick or Treat: Buy Those REITs

Russ Visch

Trick or Treat: Buy Those REITs

Summary of Trade Ideas

BMO Equal Weight REITs Index ETF (Ticker: ZRE)

Macro Update

  • The S&P/TSX Total Return REIT Index is up 8.08% YTD while the S&P/TSX Composite Index is down -8.11% YTD.
  • Industrial REITs and Residential REITs are the strongest sub-sectors up 24.50% YTD and 19.78% YTD respectively, thanks to high occupancy rates.
  • Although a defensive sector, rising rates have not impacted REITs as much as other interest rate sensitive sectors. Attractive valuations have caused a flurry of M&A transactions within the industry this year, providing upward pressure on these securities.

Bottom-Up Impact

  • Strong performers in the sector include InterRent REIT (up 35% YTD) and Canadian Apartment Property REIT (up 24% YTD)
  • Dividend Income: Many REITs consistently grow their dividends. Dream Industrial REIT’s annualized yield is 7.3%, RioCan REIT’s annualized yield is 5.8% and with other REITs yielding around 5% which enhance total portfolio performance.
    Source: Bloomberg, October 2018

The Technical Analysis

The S&P/TSX Composite REIT index broke out of a 3+ year sideways trading range earlier this year. The break above resistance near 3245 signalled a resumption of the long-term uptrend and opened a new upside target of 3875. (Roughly 20% higher from today’s level.) The index is currently in the midst of a routine pullback test of the breakout, which is usually an excellent buying opportunity.

2018-11-ETFCharts-SP-Composite-EN-848.jpg#asset:1840

Implementation

For exposure to the Real Estate sector, consider buying the BMO Equal Weight REITs Index ETF, ticker: ZRE

2018-11-ETFCharts-ZRE-EN-848.jpg#asset:1842

Top Holdings (%)
InterRent REIT 5.94
Killam Apartment REIT 5.49
Northview Apartment REIT 5.38
H&R REIT 5.38
Crombie REIT 5.3
SmartCentres REIT 5.3
Granite REIT 5.3
Cdn Apartment Prop REIT 5.28
Boardwalk REIT 5.27
NorthWest Healthcare Prop 5.24
Russ Visch

Trick or Treat: Buy Those REITs

Summary of Trade Ideas

BMO Equal Weight REITs Index ETF (Ticker: ZRE)

Macro Update

  • The S&P/TSX Total Return REIT Index is up 8.08% YTD while the S&P/TSX Composite Index is down -8.11% YTD.
  • Industrial REITs and Residential REITs are the strongest sub-sectors up 24.50% YTD and 19.78% YTD respectively, thanks to high occupancy rates.
  • Although a defensive sector, rising rates have not impacted REITs as much as other interest rate sensitive sectors. Attractive valuations have caused a flurry of M&A transactions within the industry this year, providing upward pressure on these securities.

Bottom-Up Impact

  • Strong performers in the sector include InterRent REIT (up 35% YTD) and Canadian Apartment Property REIT (up 24% YTD)
  • Dividend Income: Many REITs consistently grow their dividends. Dream Industrial REIT’s annualized yield is 7.3%, RioCan REIT’s annualized yield is 5.8% and with other REITs yielding around 5% which enhance total portfolio performance.
    Source: Bloomberg, October 2018

The Technical Analysis

The S&P/TSX Composite REIT index broke out of a 3+ year sideways trading range earlier this year. The break above resistance near 3245 signalled a resumption of the long-term uptrend and opened a new upside target of 3875. (Roughly 20% higher from today’s level.) The index is currently in the midst of a routine pullback test of the breakout, which is usually an excellent buying opportunity.

2018-11-ETFCharts-SP-Composite-EN-848.jpg#asset:1840

Implementation

For exposure to the Real Estate sector, consider buying the BMO Equal Weight REITs Index ETF, ticker: ZRE

2018-11-ETFCharts-ZRE-EN-848.jpg#asset:1842

Top Holdings (%)
InterRent REIT 5.94
Killam Apartment REIT 5.49
Northview Apartment REIT 5.38
H&R REIT 5.38
Crombie REIT 5.3
SmartCentres REIT 5.3
Granite REIT 5.3
Cdn Apartment Prop REIT 5.28
Boardwalk REIT 5.27
NorthWest Healthcare Prop 5.24