Monthly Dividend Stock In Focus: Dream Industrial REIT

Up to date on June 18th, 2021 by Bob Ciura

Actual Property Funding Trusts, or REITs, are divided into totally different sub-sectors relying on the operations of the underlying companies.

Industrial REITs stand out due to their give attention to single-tenant properties. Whereas this poses greater emptiness threat than multi-tenant properties, it might additionally result in mispriced property and engaging shopping for alternatives.

Dream Industrial REIT (DREUF) is an industrial REIT which will not be well-known to buyers as a result of it operates primarily in Canada.

Nonetheless, Dream Industrial REIT has a excessive dividend yield of 4.7%, which is greater than thrice the typical dividend yield within the S&P 500. And, the inventory pays its dividends on a month-to-month foundation.

You possibly can obtain our full checklist of month-to-month dividend shares (together with related monetary metrics like dividend yields and payout ratios) which you’ll be able to entry under:

For retirees and different buyers who depend on dividend funds, month-to-month dividends are far superior to the normal quarterly fee schedule.

Dream Industrial REIT’s excessive dividend yield and month-to-month dividend funds are traits that attraction to earnings buyers.

This text will analyze the funding prospects of Dream Industrial intimately.

Enterprise Overview

Dream Industrial is a Canadian-based, industrial-focused Actual Property Funding Belief that operates in two broad divisions:

• Multi-Tenant Properties
• Single-Tenant Properties

This diversification is excellent amongst different industrial REITs and in addition amongst many different sorts of REITs with single-tenant properties.

The belief owns and operates a portfolio of 280 geographically diversified gentle industrial properties, which makes up 28.8million sq. ft of gross leasable space throughout predominantly Canada, with some operation in america.

A lot of the portfolio’s gross leasable space is in multi–tenant buildings with the remaining in single–tenant buildings.

Supply: Investor Presentation

Dream Industrial is within the means of diversifying its asset combine, however it can probably stay centered on Canada and on industrial properties.

On Could 4th, Dream Industrial launched Q1 outcomes. Diluted FFO per unit for the quarter got here in at $0.16 USD, up 10% from the 12 months–in the past quarter in fixed foreign money. The Belief collected over 99% of recurring contractual gross lease within the first quarter, which is principally pre–pandemic levels. Moreover, the Belief has acquired roughly 95% of the $2.3 million contractual gross lease deferred in Q2 2020.

Development Prospects

Dream Industrial REIT’s progress is determined by the flexibility to problem new items or problem debt, and make investments the proceeds of those capital markets transactions into high-quality industrial actual property property. The belief can be extremely depending on its means to supply new tenants and renew present leases in its property portfolio.

With that in thoughts, buyers ought to be aware that the belief has had a really sturdy stage of occupancy since its preliminary public providing.

Its occupancy fee has improved in current quarters because the belief continues to benefit from sturdy fundamentals in industrial properties. Dream Industrial is specializing in the above 4 long-term progress drivers, along with future acquisitions that can construct and enhance its whole portfolio.

Going ahead, we count on 2% annual FFO-per-share progress every year. For its half, Dream Industrial sees a optimistic progress outlook for itself.

Supply: Investor Presentation

The belief is closely concentrated in Ontario and Quebec, areas during which it has skilled nice success by way of renewal spreads lately. It additionally has contractual lease will increase, a pure tailwind to rental progress.

Occupancy stays excessive and remains to be rising, and it’s continuously managing its renewals to seize greater rents as shortly as doable. Dream Industrial is constructing its give attention to e-commerce properties as a result of the belief sees highly effective, long-term tailwinds in that area.

The belief is positioning itself to be a premier supplier of area its tenants have to do enterprise within the coming years. Acquisitions are a serious part of the corporate’s progress plan.

To date in 2021, the Belief has accomplished over USD $290 million of acquisitions. These embrace earnings–producing property and a 30–acre parcel of land within the Larger Toronto Space. There are additionally $128 million of acquisitions that are agency, underneath contract, or in exclusivity within the goal markets in Canada, U.S., Germany, and the Netherlands.

In whole, we see Dream Industrial’s progress outlook as fairly favorable and supportive of long-term funds-from-operations progress. Lastly, Dream Industrial has begun to broaden in Europe, with an preliminary portfolio concentrated primarily within the Netherlands, and in addition in Germany.

Europe is chargeable for over 20% of world GDP, and holds greater than 500 million individuals. With Dream Industrial simply starting to scratch the floor of prospects in Europe, the belief has the potential to see an extended runway for progress on this area.

Dividend Evaluation

Dream pays a present month-to-month distribution of $0.0583 per share in Canadian {dollars}. That works out to $0.70 per share yearly in Canadian foreign money. In U.S. {dollars}, Dream has an annualized dividend payout of $0.56 per share, which represents a present yield of 4.7%.

Word: As a Canadian inventory, a 15% dividend tax can be imposed on US buyers investing within the firm exterior of a retirement account. See our information on Canadian taxes for US buyers right here.

Actually, the distribution has by no means been reduce within the belief’s comparatively quick working historical past, but additionally hasn’t elevated it for seven years. The stagnant payout could also be discouraging for buyers on the lookout for dividend progress.

The dividend payout is roofed, as 2020 noticed FFO-per-share of $0.65. From a dividend protection perspective, Dream Industrial is in fairly good condition.

One other issue serving to to safe Dream Industrial’s dividend payout is its sturdy steadiness sheet. Dream Industrial has an investment-grade credit standing of BBB and a manageable stage of debt.

Supply: Investor Presentation

Lastly, earnings buyers ought to take into account the payout ratio when assessing a dividend’s sustainability. Payout ratios for REITs are all the time very excessive as a result of they’re required to distribute practically all of their earnings.

At 89% anticipated for 2021, Dream Industrial’s payout ratio seems wholesome and we view the dividend payout as secure. Distribution progress might show to be elusive, however we don’t see a reduce anytime quickly.

Closing Ideas

Dream Industrial REIT’s excessive dividend yield and month-to-month dividend funds are two the reason why the corporate will stand out to earnings buyers.

The inventory yields over 4.5%, which is comparatively interesting given the persistent low rate of interest atmosphere. Traders might discover the excessive yield a pretty earnings chance.

The REIT has sturdy fundamentals and a really excessive occupancy fee. The belief additionally has the potential for future progress, particularly in Europe. Dream Industrial might curiosity these buyers on the lookout for excessive earnings and progress potential.