This Cheap REIT Offers a 7.4% Yield

Baystreet.ca - Baystreet - Fri Apr 28, 2023

A real estate investment trust (REIT) owns and operates income-producing real estate that can span a variety of real estate types. These investment vehicles have been a strong and consistent source of income for Canadian investors since the Great Recession. Today, I want to zero-in on the Dream Office REIT (TSX:D.UN), a REIT that owns and operates high-quality office properties in major urban centres across Canada.

Investors can expect to see this REIT’s first batch of fiscal 2023 earnings in the first week of May. In Q4 2022, this REIT posted a net loss of $82.6 million. Meanwhile, diluted funds from operations (FFO) per unit fell to $0.37 compared to $0.40 in the previous year. Dream Office REIT suffered a dip due to higher interest expenses and a recovering macro environment as commercial properties emptied during the COVID-19 pandemic.

For the full year, this REIT delivered adjusted EBITDAFV of $127 million – down from $128 million for the full year in fiscal 2021. Meanwhile, net income nearly halved to $63.6 million in fiscal 2022. For its business update, Dream Office reiterated that its tenants have wrestled with a challenging macro environment. Indeed, the full impact of the COVID-19 pandemic, supply chain disruptions, geopolitical conflicts, and other factors has yet to be determined.

Shares of this REIT currently possess a favourable price-to-earnings ratio of 10. Meanwhile, this REIT offers a monthly distribution of $0.083 per share. That represents a very tasty 7.5% yield.