Real estate investment trusts (REITs) are great sources of recurring income for investors. Since they need to distribute out the vast majority of their profits back to investors, as long as the business is doing well, you can be sure that your recurring cash flow is safe.
But rather than worry about which type of REIT to invest in, you can get a broad mix of them inside of an exchange-traded fund (ETF).
For Canadian investors, a good option is BMO Equal Weight REITs Index ETF (TSX:ZRE). With a yield of 4.6%, the REIT gets you a far better payout than what you can obtain with other dividend stocks. Its 14% gains thus far in 2021 have also outperformed the TSX, which has risen by just 12%.
The strength in the ETF is that it has a diverse group of REITs in its portfolio. Minto Apartment REIT (TSX:MI-UN) accounts for 4.7% of its total weight and is its top holding. Other REITs in its holdings include those focused on industrial properties, hospital properties, and many other spaces.
While some of those REITs may be riskier than others, collectively they give investors a diversified mix of assets to invest in. And if the economy continues to recover this year, they could all be doing well and generate even better returns for investors.
With nothing but REITs in this fund, this is a great way to tap into the rising real estate market. The average holding in the fund also trades right around its book value, meaning you also won't have to pay much of a premium at all for these quality investments.
