Stock Market Smarts: Low Risk Investments
Finding low-risk places to invest is not easy in these turbulent times. But if you look for companies that have demographics in their favour and offer a reasonable yield, you may find some opportunities.
One area worth considering is businesses that specialize in residences for the growing seniors population. I suggest a good choice is Chartwell Retirement Residences REIT (TSX: CSH.UN) and here is what you need to know about it.
Chartwell is the largest owner and operator of seniors’ residences in Canada. The REIT indirectly owns and operates 175 residences across four provinces providing a complete range of seniors housing communities from independent supported living through assisted living to long-term care.
Why we like it:
Income investors are basically interested in two things: decent cash flow and no headaches. That translates into sound, stable businesses with no drama attached. Chartwell fills the bill. It provides a wide range of residential accommodations for seniors, making it almost
recession-proof. The cash flow is modest but dependable and secure. I’ve often said in the past that boring businesses are often the best for income purposes. Chartwell qualifies.
Chartwell sold off its U.S. operations on June 30. In November, the REIT acquired five retirement residences in Ontario totaling 616 suites for an aggregate purchase price of $253.9 million before closing costs.
“With the completion of our most recent portfolio acquisition, we have invested $587.3 million in well-located and well-built properties in our core Canadian markets, substantially replacing cash flows from our U.S. portfolio,” said CEO Brent Binions. “We are confident that these acquisitions and our ongoing development program will provide a significant contribution to our earnings for many years to come.”
The trust pays monthly distributions of $0.0459 (about $0.55 annually) to yield 4.4 per cent. The payment was increased by the equivalent of about a penny a year last April after being at the same level since 2010, so don’t expect regular hikes.
Chartwell offers a distribution reinvestment plan (DRIP) that allows investors to purchase additional units at zero commission and also offers bonus units equal to 3 per cent of the monthly payments.
Who it’s for:
Chartwell REIT is a good choice for investors looking for a low-risk security that provides decent but not exciting cash flow. There is little upside potential.
Ask your financial adviser if Chartwell is suitable for your account.