CT Reit offers safety and income

Canadian Tire is a brand with an intangible place in the national psyche. It has been around for 103 years, it has 100% name recognition, and it is estimated that 90% of Canadians shop at a CTC store at least twice a year. 

CTC was considered an essential retailer during the pandemic, which boosted revenues and enhanced its brand recognition. House-bound customers bought household products, home improvement materials, and outdoor supplies with few other places to spend their money.  

In addition to 650 company-owned stores CTC (TSX: CT.A ) has 750 franchised outlets. It also owns the Mark’s work wear and casual clothing chain as well as SportChek, which is Canada’s largest retailer of sports equipment. In 2019, it bought all 65 Party City stores in Canada from the US parent.

In 2018 it acquired Helly Hansen, the Norwegian retailer of sports and outdoor wear, and recently sold it for a profit of $415 million. The cash is being used to refurbish stores, pay down debt, and buy back its shares.

Like Loblaw Co. Ltd. (TSX: L) and Empire Co. (TSX: EMP.A), the two grocers who have spun off their real estate assets into Real Estate Investment Trusts (REITs), Canadian Tire has done the same thing. CT REIT (TSX: CRT.UN) went public in October 2013, raising $500 million for the parent as it transferred its Canadian Tire store real estate into the REIT. Since then, the number of stores has increased by 40% and the REIT has prospered along with the parent.

As with  Loblaw’s Choice Properties REIT (TSX: CHP.UN) and Empire’s Crombie REIT (TSX: CR.UN), Canadian Tire retains control. It is the REIT’s major tenant, ensuring high occupancy levels. Its draw as an anchor retailer means other top-quality companies complement the malls where it is located. CT REIT’s distribution has increased in each of the last five years, as has the dividend of its parent, Canadian Tire.

While Canadian Tire’s quarterly payment of $1.775 per share yields a high yield of 4.17% at current prices, the REIT offers an even better return for those looking for income.

Here’s an update. Prices are as of Sept. 15.

Background: CT REIT (TSC:CRT.UN) went public in October 2013, assuming ownership of parent Canadian Tire’s retail stores. It now has 375 properties, mainly stores, across all 10 provinces and two territories. Canadian Tire owns approximately 85% of CT REIT and provides 92% of its annual rent.

Performance: The shares are 16% higher year-to-date.

Discussion: CT REIT benefits from its relationship with its parent. As Canadian Tire grows, so does the REIT. Canadian Tire has emerged from the pandemic with a revitalization strategy and has rebounded from fears about the impact of US tariffs. Over the next two years, Canadian Tire is spending $2 billion on store upgrades and expanding its loyalty program.

Canadian Tire recently spent $30 million to acquire the intellectual property of Hudson’s Bay Company, which offers the opportunity to launch private label products under that iconic name.

The REIT’s occupancy rate is high and stable. It reported a 99.5% occupancy rate for the second quarter of 2025, reflecting long-term leases with Canadian Tire and a disciplined property management strategy.

Recent developments: CT REIT earned $149.8 million in property revenue in its second quarter, up 3.7% from last year. Net income was flat at $103 million. The REIT added new properties in Calgary and Saskatoon during the period. It will open two more this quarter.

Distributions: CT REIT has has increased its monthly distributions every year since its IPO in2013. The hikes have a compound annual growth rate of 3.3%. The most recent increase was 2.5% in July. The units yield 5.7% at current prices.

The payout ratio is 72%, which is in line with the company’s target ratio of 75%-80%.

This article appeared in a recent issue of the Income Investor.  For information on how to reprint this article please view this page.