Then and Now – H&R REIT
This post is a continuation of my series Then and Now where I revisit some older blogposts and either rip them to shreds (because my thinking has changed) or I’ll confirm my position on some personal finance topics or specific investments.
- I started writing about H&R REIT on this site back in 2010.
- I think REITs have a good home in registered accounts (like TFSAs, RRSPs) because Real Estate Investment Trusts distribute their income (primarily from rent) to shareholders usually in the form of dividends, return of capital, and income. While it depends on the REIT, if the REIT distributes a portion of their income as income as return of capital, interest, capital gains or dividends, each portion will be taxed accordingly. Keeping REITs inside a TFSA or RRSP avoids this tax complication. Consider that for your portfolio.
- I bought a small portion of H&R REIT many years ago because it was a core holding of most REIT Exchange Traded Funds (ETFs).
- I’ve decided to since “unbundle” REIT holdings since I don’t want to pay management expense fees over 0.50% for what I can own directly.
- My idea at the time was to DRIP this stock, and not stop.
- H&R REIT is now priced a bit under $22.
- Distributions from this REIT have almost doubled since early 2010.
- I continue to DRIP this stock, with no intention of stopping. I figure distribution income from this company might be enough to eventually pay for part of our property taxes every year. It’s good to be a landlord without the headaches.
My decision to buy (and hold) this company was a decent call to date although not a huge winner**.
** I did sell all HR.UN units coming out of the COVID-19 pandemic / market rally in 2020. *** I moved that money into renewable stocks and some REI.UN in summer 2020 (RioCan REIT).
This is a great reminder that things can and do change.
Purchasing individual stocks has risks and the buyer must always beware.
What’s your take on H&R REIT? Own it? Do you own REITs?
I’ve had this H&R turkey in my RRIF since late 2012 and am still slightly underwater on it though distributions would pull me slightly above. However my wife bought BPY.UN in her RRSP in spring 2014 and is plus 28% on the purchase so this article made me look at the whole situation and make the decision to go with growth and momentum so next week I’ll make the switch. No doubt that will be the trigger for H&R to stage a huge rally!
Well, I hope H&R can make a nice rally in 2015, they are due. BPY.UN has been on fire over the last year, especially since the summer. Will it continue? Hard to say but I do like yields in the 3-5% range and this guy is right there. I don’t see the need for office space changing overnight, so as long as companies need some office space, REITs will continue to thrive.
I owned a REIT fund through my work investment plan where I had the pick of the litter of a select few high MER mutual funds that were advertised as low-fee 🙂 Gotta love that, but anything for the 100% matching from the company, right!
If I remember, the performance of that fund was fairly decent and consistent. REITs have always intrigued me but I’ve never taken the time to fully understand them. Or, maybe there isn’t that much to understand. I just don’t think I have a clear understanding of what would make the price of them rise and fall and how much risk there is for them to significantly lower their distributions.
In any case, the reason I purchased some was to balance out my portfolio a bit. I should probably consider buying some again now that I no longer have that work portfolio. Thanks for the reminder!
We have very few choices when it comes to our workplace DC pension plan, maybe 8? funds? REITs are not one of them.
REITs are largely at the mercy of their tenants, when it comes to profits and distributions. REITs have had a decent year to date, up close to 10% I think.
reit’s scare me as does real estate in general. with interest rates rising sooner or later, talk of a real estate bubble and e-commerce on the rise; big malls may have a few bumps ahead. just a thought!
Yes, REITs can be a bit scary with interest rates on the rise. Won’t/can’t REITs just raise rent prices a bit though Gary?
agreed. as long as there is still a renter. in the USA after the housing bubble a lot of malls where half empty. i went to laura secord in guelph mall on wednesday and it was gone because of a rent increase but purdy’s jumped right in! perhaps businesses are much more stable here. i hope so.
I hear what you are saying…hard to know if this sector will continue to payout or not. I guess this is the challenge in owning individual securities, another reason to index more in 2015; the indexers probably have it right 😉
I’m with Gary on this one, and one also must consider the increased shift to virtual businesses, so “space” might not be such a growing business as it has been in the past. For the record I held H&R a couple of years back in my TFSA… I don’t hold it any longer, as I found “other” investments that met my needs – Cheers.
I don’t think commercial or retail space is going anywhere soon, but I can see more “virtual” businesses for sure. I could also see some consolidations happening in the REIT space, for that reason. Will I be right? I have no idea 🙂
I like some REITs but a word of caution for new investors: if interest rates start to rise fairly dramatically (e.g. if you can get a 5 year GIC at 4-7%) then the price per unit for REITs may fall correspondingly. Many people bought REITS looking primarily for income and if they can get the same income with no risk, they will exit them. If that happens, the price per unit will fall to drive up the yield to continue to keep them attractive. That said, I expect to keep our REIT holdings even if the unit price falls so long as they continue to be well run companies and they continue to generate their expected distributions.
And Mark, it’s great you pointed out how complicated it can be to hold REITs in non-registered accounts. Much better for tax bookkeeping to keep them in a registered account.
Thanks Bet, yes, I learned that lesson early: keep REITs in registered accounts. I tend to keep only CDN dividend-paying stocks in our non-registered accounts. Everything else is registered, tax-deferred or tax-free.
Yes, REITs may fall in price eventually however it’s hard to know when that might happen. The good side of the price falling, my DRIPs can buy more units cheaper and get yield in the process.
I made one of the mistakes you mentioned when I first started investing while rebalancing my portfolio. I had ZRE REIT ETF in my non-registered account and it definitely reduced the amount of distributions I received because of the tax implications. Lesson learned! Thanks for providing insight on this so hopefully others well avoid the same mistake I made.
Mr. Captain Cash
You don’t know what you don’t know, we all make mistakes and have misunderstandings with things. Now and in the future, I have plans to continue owning REITs.
I consider HR and Rio Can the top two Canadian reits for myself as I own them both. Good history on both the holdings. I find it quite peculiar if one wants to own a CDN reit fund they all charge over .50 mer which is even more ridiculous Beach not many of them hold more than 10 holdings
I think ZRE, VRE, XRE are good REIT ETFs but I agree and I’ve been “unbundling” REIT ETFs for a couple of years now. That process should be complete in 2015.