Nexus Industrial REIT (TSX:NXR.UN) is among the many extra compelling small-cap alternatives on the TSX proper now.
Most retail buyers have by no means heard of this actual property funding belief (REIT). Nevertheless, as we head into the second quarter (Q2) of 2026, I imagine Nexus is undervalued and presents upside potential, offering buyers with a gradual stream of passive earnings.
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Nexus accomplished a significant transformation
For years, Nexus held retail properties alongside its industrial belongings, which made it tougher to worth and simpler to disregard.
The REIT bought its retail portfolio initially of 2025, elevating $47 million. At the moment, 99% of its internet working earnings (NOI) comes from industrial properties throughout Canada.
Chief Government Officer Kelly Hanczyk described the corporate’s new function as being “Canada’s industrial constructing accomplice,” and that focus exhibits up within the numbers.
- Full-year 2025 adjusted earnings earlier than curiosity, tax, depreciation, and amortization (EBITDA) hit a report $120 million.
- NOI rose 2.8% to a report $129 million.
- Its funds from operations rose to $0.61 per share whereas the online asset worth grew to $13.22 per share.
- By comparability, the REIT presents shareholders an annual dividend of $0.64 per share, which interprets to an annual yield of almost 8%.
The investment-grade push is a key catalyst
Nexus at present has an elevated debt-to-EBITDA ratio of almost 11 occasions. However administration additionally laid out a transparent plan to succeed in the nine-times vary by year-end 2026.
Notably, DBRS, a credit standing company, has indicated {that a} debt-to-EBITDA ratio of round 9 occasions is the edge for an investment-grade score. And an funding grade score would meaningfully decrease Nexus’s borrowing prices whereas opening the door to a a lot bigger pool of institutional buyers.
Chief Monetary Officer Mike Rawle was direct in regards to the lender setting on the decision: “Everybody needs to lend to you simply earlier than that as a result of they need a part of the debt deal.”
The trail to getting there entails a mixture of asset gross sales, improvement completions, and natural NOI progress.
A number of transactions are already in movement:
- A agency sale contract exists for a 190,000-square-foot constructing in Purple Deer, Alberta, with closing in April.
- The Glover Highway property in Hamilton is being marketed.
- And the 50% stake in a retail mall can be being soft-marketed.
Every accomplished sale reduces leverage and frees up capital.
A powerful progress pipeline
Past the steadiness sheet restore story, Nexus has a strong improvement pipeline taking form.
Two new tasks have been just lately introduced.
- An as much as 180,000 sq. foot micro industrial improvement at Adams Highway in Kelowna, British Columbia, with an anticipated yield between 7% and 10%.
- An 80,000-square-foot growth at Savage Highway in Richmond, BC, is predicted to ship a stabilized 6% yield in one in every of Canada’s tightest industrial markets.
The Montreal acquisitions accomplished in late 2025 additionally deserve consideration. Nexus paid roughly $145 per sq. foot for 2 buildings that comparable properties commerce at $215 to $235 per sq. foot. A year-end appraisal confirmed a mark-to-market achieve of roughly $23 million.
Personal the TSX dividend inventory within the TFSA
Nexus models commerce at a significant low cost to NAV. The enterprise is rising, and the steadiness sheet is enhancing. Moreover, an investment-grade score might act as a re-rating catalyst earlier than year-end.
Earnings-seeking shareholders can contemplate holding the TSX dividend inventory within the Tax-Free Financial savings Account to learn from tax-free dividend earnings and capital positive aspects.
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY |
| Nexus Industrial REIT | $8.08 | 18,875 | $0.053 | $1,000 | Month-to-month |
Nexus REIT trades at a 5% low cost to consensus value targets. Additional, to earn $1,000 in month-to-month dividend earnings, it’s essential to purchase 18,875 shares of the REIT, that are value roughly $152,500 as we speak.
Investing such an enormous sum in a single inventory could be very dangerous. Canadian buyers ought to contemplate diversifying their portfolios with different high-yield dividend shares.
