Why this Canadian REIT could be a buy-and-hold-forever stock

Investors looking for dividend stocks that pay consistent (and growing) dividends over time have plenty of options to consider. However, real estate investment trusts (REITs) are often a good place for such investors to look first for a number of reasons.

First, holding shares in funds that focus on acquiring and managing real estate offers a great relative defensive effect. Real estate assets are known for their robust cash flow profile and are difficult and expensive to replicate. Additionally, REITs are required to pay out at least 90% of their net operating income to investors. Therefore, as cash flows increase in line with rental growth and other market factors, investors see higher income streams over time.

That’s a win. But choosing the right sector (residential, commercial, office, retail, industrial, mixed-use, etc.) can be difficult. Here’s one REIT in the industrial sector that I think could be a winner, and why.

Dream Industrial REIT

Dream Industrial REIT (TSX:DIR.UN) is one of Canada’s top REITs, with a portfolio of high-quality assets that provides warehousing and distribution to leading world-class companies seeking proximity to population centers.

Dream Industrial’s net operating income (NOI) growth has been robust in recent years as companies seek to position themselves for growth in Dream Industrial properties. With one of the lowest vacancy rates among its peer group and plans to expand the portfolio over time, investors will continue to look at the company’s balance sheet for signs of growth.

I think Dream Industrial may be best positioned to continue growing in this sector, and its 5.6% dividend yield could be among the best in this sector.

Industrial real estate will continue to feel the love

Unlike office real estate and other sub-asset classes within the real estate sector, industrial real estate has its own supply and demand fundamentals, which in my opinion are much more favorable.

Perhaps the easiest statement to understand is the reality that large parcels of land are no longer being developed where warehouses and other distribution facilities can be built in close proximity to city centers.

So REITs like Dream Industrial, which hold such world-class assets, are likely to continue to rise in value, while other companies and trusts looking to invest in this space struggle to find the financing to acquire new assets.

With a loan portfolio that was also created years ago, and many of these loans refinanced at attractive rates, I think it would be difficult to find the kind of NOI growth outside of incumbents. In my opinion, Dream Industrial is one of the best in this field to consider right now.