The pandemic presented this firm with unique challenges. However, it’s remained profitable and is well positioned to keep weathering the crisis—and to increasingly prosper as the economy reopens and rebounds. Meanwhile, the high yield adds appeal.
The shares trade at 17.1 times the 2022 forecast cash flow.
DREAM OFFICE REIT (Toronto symbol D.UN; www.dream.ca) sold 138 properties in 2016 as part of a new strategic plan. Due to those sales, in July 2017, Dream cut its monthly distribution by a third, to $0.0833 a unit from $0.125. The new annual rate of $1.00 yields a high 5.1%.
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Dream now has 30 office properties, including one under development. The downtown Toronto market supplies 79% of the REIT’s rental revenue and accounts for 82% of the portfolio’s value. Its overall occupancy rate as of March 31, 2022, was 85.0%—88.6% at its downtown Toronto properties, and 78.9% in other markets.
The REIT has an under-appreciated asset: its 9.8% stake in Dream Industrial REIT (Toronto symbol DIR.UN), which owns a diversified portfolio of industrial and logistics space in North America. As of March 31, 2022, that investment was worth $429.4 million.
Dividend Stocks: Reduced occupancy lowers revenue and cash flow
In the three months ended March 31, 2022, Dream’s revenue fell 1.6%, to $25.86 million from $26.27 million a year earlier. Revenues were down on lower occupancy rates due to COVID-19 lockdowns. The sale of a property also hurt revenue.
Cash flow during the period was $21.0 million, 1.5% less than $21.31 million a year earlier. Due to fewer units outstanding, cash flow per share increased 2.6% to $0.39 from $0.38 a year earlier.
The REIT trades at a high, but still reasonable, 17.1 times its 2022 forecast of $1.13 a unit.
Here is a question : there is an obvious difference between a dividend and a distribution especially in a non-registered account . So should an investor limit such stocks as the above Dream REIT to only a registered account ( especially a TFSA )where the distribution income will not be subject to the same tax as if it were in a non-registered account or as a withdrawal from a RRIF ??
Every time I read your recommendation to buy dream office reit I scratch my head. They sold 138 properties and cut distributions by a third because of that? In 2016 yet, and no indication of when distributions will go back up due to the 6 year old ‘strategic plan’. Where did the money go? I look for investments that increase payouts, not that make money disappear, please explain.
We continue to see Dream Office as a buy for long-term gains. It continues to adjust its focus to the lucrative Toronto market and new leases in downtown Toronto attracted 34.2% premium on past rents.
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Here is a question : there is an obvious difference between a dividend and a distribution especially in a non-registered account . So should an investor limit such stocks as the above Dream REIT to only a registered account ( especially a TFSA )where the distribution income will not be subject to the same tax as if it were in a non-registered account or as a withdrawal from a RRIF ??
Every time I read your recommendation to buy dream office reit I scratch my head. They sold 138 properties and cut distributions by a third because of that? In 2016 yet, and no indication of when distributions will go back up due to the 6 year old ‘strategic plan’. Where did the money go? I look for investments that increase payouts, not that make money disappear, please explain.
We continue to see Dream Office as a buy for long-term gains. It continues to adjust its focus to the lucrative Toronto market and new leases in downtown Toronto attracted 34.2% premium on past rents.