Updated June 18, 2021 by Bob Ciura
Real Estate Investment Trusts or REITs are divided into different sub-sectors depending on the business activity of the underlying businesses.
Industrial REITs are characterized by their focus on single-tenant real estate. Although this carries a higher risk of vacancy than multi-tenant properties, it can also lead to incorrect valuations and attractive purchase opportunities.
Dream Industrial REIT (DREUF) is an industrial REIT that investors may not be aware of as it operates primarily in Canada.
However, Dream Industrial REIT has a high dividend yield of 4.7%, which is more than three times the average dividend yield on the S&P 500. And the stock pays its dividends monthly.
You can download our full list of Monthly Dividend Stocks (along with relevant financial metrics like dividend yields and payout ratios) which you can access below:
For retirees and other investors who rely on dividend payments, monthly dividends are far superior to the traditional quarterly payment plan.
Dream Industrial REIT’s high dividend yield and monthly dividend payments are qualities that appeal to income investors.
This article analyzes Dream Industrial’s investment prospects in detail.
Dream Industrial is a Canada-based industrial real estate investment trust that operates in two major businesses:
- Multi-tenant properties
- Single tenant properties
This diversification is excellent with other industrial REITs and also with many other REIT types with single-tenant properties.
The trust owns and operates a portfolio of 280 geographically diversified light industrial properties that 28.8Million square meters the gross rental area above mostly Canada, with some operations in the United States.
Most of the Portfolio‘s Gross rental area is in the multi–Tenant building With the rest in single–Tenant building.
Source: Investor Presentation
Dream Industrial is in the process of diversifying its asset mix but will likely continue to focus on Canada and industrial real estate.
May 4ththe, Dream industry published Q1 results. The diluted FFO per unit for the quarter was. $$ 0.16, up 10% of the year–before quarter in constant currency. The trust raised over 99% of the recurring contractual gross rent in first quarter that basically before–pandemicvels. In addition, the trust received approximately 95% of the $ 2.3 million contractual gross rent postponed in the second quarter of 2020.
Dream Industrial REIT’s growth depends on its ability to issue new shares or bonds and invest the proceeds from these capital market transactions in high quality industrial real estate. The trust also relies heavily on its ability to find new tenants and extend existing leases in its property portfolio.
With this in mind, investors should note that the trust has had a very high utilization rate since it went public.
The rental rate has improved in recent quarters as the trust continues to benefit from strong industrial real estate fundamentals. Dream Industrial is focused on the above four long-term growth drivers as well as future acquisitions that will build and improve its overall portfolio.
For the future, we expect FFO to grow by 2% per share every year. For its part, Dream Industrial sees positive growth prospects.
Source: Investor Presentation
The Trust has a strong focus on Ontario and Quebec, areas where it has had great success with renewal surcharges in recent years. There are also contractual rent increases, a natural tailwind for rental growth.
Occupancy is still high and growing, and it is constantly managing its renewals to get higher rents as soon as possible. Dream Industrial is expanding its focus on e-commerce real estate as the trust sees strong, long-term tailwind in this area.
The foundation positions itself as a leading provider of space that its tenants will need for their business in the coming years. Acquisitions are an important part of the company’s growth plan.
In 2021, the trust has so far over U.S. dollar $290 Million acquisitions. These include income–Production of assets and a 30–acre Land in the greater Toronto area. There’s also $ 128 Millions of acquisitions that are firm under contract or exclusively in the target markets Canada, USA, Germany, and the Netherlands.
Overall, we see the growth prospects of Dream Industrial as quite favorable and support the long-term growth of the funds-from-operations. Eventually Dream Industrial started expanding in Europe, with an initial portfolio mainly focused on the Netherlands and also Germany.
Europe accounts for over 20% of global GDP and has a population of more than 500 million. With Dream Industrial just scratching the surface of opportunities in Europe, the Trust has the potential to see a long growth path in this region.
Dream currently pays a monthly dividend of $ 0.0583 per share in Canadian dollars. That’s the equivalent of $ 0.70 per share annually in Canadian currency. In US dollars, Dream has an annualized dividend payout of $ 0.56 per share, which translates to a current yield of 4.7%.
Note: As a Canadian stock, US investors who invest in the company outside of a retirement account will be charged a 15% dividend tax. Check out our guide to Canadian taxes for US investors here.
In fact, in the trust’s relatively short operating history, the payout has never been cut, but has not been increased for seven years. The stagnant payout can be daunting for investors looking for dividend growth.
The dividend payout is covered as it recorded an FFO per share of $ 0.65 in 2020. From a dividend coverage perspective, Dream Industrial is in pretty good shape.
Another factor that secures Dream Industrial’s dividend payout is its strong balance sheet. Dream Industrial has an investment grade rating of BBB and manageable debt.
Source: Investor Presentation
Finally, income investors should consider the payout ratio when assessing the sustainability of a dividend. The payout ratios for REITs are always very high as they have to distribute almost all profits.
Dream Industrial’s payout ratio, which is expected to be 89% for 2021, looks healthy and we believe the dividend payout is certain. Distribution growth may prove elusive, but we don’t see any cut anytime soon.
Dream Industrial REIT’s high dividend yield and monthly dividend payments are two reasons the company will stand out for income investors.
The share is yielding over 4.5%, which is relatively attractive given the persistently low interest rate environment. Investors can view the high return as an attractive income opportunity.
The REIT has strong fundamentals and a very high occupancy rate. The trust also has the potential for future growth, particularly in Europe. Dream Industrial may be of interest to investors looking for high income and growth potential.
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