Allied Properties holds some of the best properties in Canada’s biggest cities. Those assets should let it sustain its high distribution.
The share price should turn around before much longer and meanwhile the REIT is priced below its peers at just 7.5 times free cash flow.
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ALLIED PROPERTIES REAL ESTATE INVESTMENT TRUST (Toronto symbol AP.UN; www.alliedreit.com) owns 199 office buildings and 13 properties under development, mainly in major Canadian cities.
Most of Allied’s buildings are categorized as Class I buildings, and together they comprise over 14.3 million square feet of leasable area. Class I refers to 19th- and early-20th-century industrial buildings that are now used as office space. In addition to hardwood floors, they often have exposed beams and brick walls.
Dividend Stocks: High yield and debt-reduction efforts make the future even more attractive for Allied Properties
Starting with the January 2023 payment, Allied raised its monthly distribution by 2.9%. The new annual rate of $1.80 a unit yields a high 9.9%.
Allied’s revenue in the quarter ended June 30, 2023, rose 4.1%, to $136.1 million from $130.8 million a year earlier. However, due to higher interest expenses, its cash flow decreased by 3.3%, to $82.2 million from $85.1 million a year earlier. With more shares outstanding, cash flow per unit decreased by 3.0%, to $0.588 from $0.606.
The REIT has now completed the sale of its three datacentres in downtown Toronto for $1.35 billion. Allied plans to use $1.0 billion of the proceeds to pay down its debt of $4.47 billion (as of June 30, 2023). It will also pay its unitholders a special distribution of a yet-to-be-determined amount.
Allied’s cash flow will probably total $2.44 a unit in 2023, and the units trade at 7.5 times that forecast.
Recommendation in Dividend Advisor: Allied Properties REIT is a buy.