Higher Income from North American REITs

Real estate investing has long been heralded as a solid pathway to passive income, yet the reality often involves much more than simply collecting a rental check. For investors looking to enjoy the benefits of real estate-related income without the hands-on hassles and costs, real estate investment trusts (REITs) offer a liquid and accessible alternative.

REITs are companies that own, operate, and/or finance income-generating real estate across a range of property sectors. They allow individuals to invest in portfolios of real estate assets, similar to owning a portfolio of stocks, like an ETF. In return, REITs typically pay out a high percentage of their taxable income (as required by law) as distributions to unitholders.

Long-Term Outperformance of REITs

Historically, REITs have delivered competitive total returns, based on high, steady income (via distributions) and long-term capital appreciation. Since 2000, REIT indices in the U.S. and Canada have outperformed their respective market indices on a total return basis[1],[2].

RMAX: Maximizing Tax-Efficient Income from REITs

The Hamilton REITs YIELD MAXIMIZER™ ETF (ticker: RMAX) is designed to maximize monthly income by employing an active covered call strategy on a portfolio of the largest REITs in North America. Specifically, RMAX is able to generate additional monthly income by writing call options on ~30% of the underlying portfolio of REITs, maintaining ~70% growth potential. Similar to our other YIELD MAXIMIZER™ ETFs, our team utilizes an “income-first” approach to covered call writing, using at-the-money options, which deliver much higher premiums versus out-of-the-money options. Moreover, the extra income generated by call option premiums is generally taxed as capital gains, a tax efficient source of income.

Diversification Across Various REIT Sub-Sectors

REITs are often perceived as a homogeneous group; however, this perception is far from reality. Within the REIT sector, there is a wide array of sub-sectors, each characterized by the types of properties they own and the nature of the tenants that lease these properties. By blending Canadian and U.S. REITs, RMAX leverages the strengths of both markets, enhancing geographic diversification and providing access to a variety of different industries.

Retail REITs invest primarily in shopping malls, retail centers, and other properties leased to retail tenants. They generate income through rental payments from tenants operating in consumer-focused businesses.
Industrial REITs own and manage warehouses, distribution centers, and other industrial properties. They benefit from long-term leases with tenants involved in manufacturing, logistics, and e-commerce, providing stable cash flows driven by demand for industrial space.
Telecom Tower REITs specialize in owning and leasing out wireless communication infrastructure, including cell towers and antennas. They earn revenue through long-term lease agreements with telecom operators, benefiting from the increasing demand for wireless data transmission.
Data Center REITs own and operate facilities that house servers and networking equipment used for data storage and processing. They derive income from leasing space and providing services to tech companies, cloud providers, and enterprises reliant on digital infrastructure.
Multi-Family REITs invest in apartment buildings and residential complexes. They generate rental income from tenants, offering diversified exposure to the residential real estate market with potential for steady rental growth.
Healthcare REITs specialize in properties such as senior housing facilities, medical office buildings, and hospitals. They benefit from long-term leases with healthcare providers, offering investors exposure to the growing healthcare sector and demographic trends.
Self-Storage REITs own and manage storage facilities where individuals and businesses rent units to store belongings. They generate revenue through rental income from tenants seeking storage solutions, often benefiting from recurring rental demand.
Real Estate Services REITs provide real estate brokerage, property management, and real estate advisory services. They generate revenue through commissions, fees, and service contracts, catering to the operational needs of property owners and investors.
Diversified REITs hold a mix of properties across different real estate sectors, providing investors with diversified exposure to various segments of the real estate market. They aim to balance risk and return by investing in multiple property types and geographic regions.

Hamilton YIELD MAXIMIZER™ ETFs

Our YIELD MAXIMIZER™ ETFs are designed to generate high monthly income for investors by employing an active covered call strategy on some of North America’s most trusted and blue-chip sectors. To learn more about our income-first ETFs and which sectors we cover, CLICK HERE.

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A word on trading liquidity for ETFs …

Hamilton ETFs are highly liquid ETFs that can be purchased and sold easily. ETFs are as liquid as their underlying holdings and the underlying holdings trade millions of shares each day.

How does that work? When ETF investors are buying (or selling) in the market, they may transact with another ETF investor or a market maker for the ETF. At all times, even if daily volume appears low, there is a market maker – typically a large bank-owned investment dealer – willing to fill the other side of the ETF order (at net asset value plus a spread). The market maker then subscribes to create or redeem units in the ETF from the ETF manager (e.g., Hamilton ETFs), who purchases or sells the underlying holdings for the ETF.

[1] Annualized total returns based on the MSCI US REIT Index and the S&P 500 Index from December 31, 1999 through June 10, 2024. Source: Bloomberg, Hamilton ETFs
[2] Annualized total returns based on the S&P/TSX Capped REIT Index and the S&P/TSX Composite Index from December 31, 1999 through June 10, 2024. Source: Bloomberg, Hamilton ETFs

Commissions, management fees and expenses all may be associated with investments in exchange traded funds (ETFs) managed by Hamilton ETFs. Please read the prospectus before investing. Indicated rates of return are the historical annual compounded total returns including changes in per unit value and reinvestment of all dividends or distributions and does not take into account sales, redemptions, distribution or optional charges or income taxes payable by any securityholder that would have reduced returns. Only the returns for periods of one year or greater are annualized returns. ETFs are not guaranteed, their values change frequently and past performance may not be repeated.

Certain statements contained in this website may constitute forward-looking information within the meaning of Canadian securities laws. Forward-looking information may relate to a future outlook and anticipated distributions, events or results and may include statements regarding future financial performance. In some cases, forward-looking information can be identified by terms such as “may”, “will”, “should”, “expect”, “anticipate”, “believe”, “intend” or other similar expressions concerning matters that are not historical facts. Actual results may vary from such forward-looking information. Hamilton ETFs undertakes no obligation to update publicly or otherwise revise any forward-looking statement whether as a result of new information, future events or other such factors which affect this information, except as required by law.