Get 5.5% from Dream Office REIT

The evolution of the hybrid work model continues to present significant uncertainty for the future of office properties like those owned by Dream Office REIT. However, the trend appears to be here for the long term.

We feel the firm’s quality properties should continue to attract tenants and support its distributions. Meanwhile, the yield is high and should be sustainable following the unit price consolidation earlier this year.

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DREAM OFFICE REAL ESTATE INVESTMENT TRUST (Toronto symbol D.UN; www.dream.ca) owns 28 office properties, including two under development. The downtown Toronto market supplies 75% of rental revenue and accounts for 82% of the portfolio’s value.

Note—All per-unit figures adjusted for a 1-for-2 consolidation in February 2024. However, due to weaker demand for office space in downtown Toronto and the need to conserve cash for debt repayments, Dream did not adjust the monthly distribution of $0.08333, effectively cutting the payment by 50%. The $1.00 annual rate yields 5.5%.

Dividend Stocks: Leasing should grow cash flow and cut risk for Dream Office REIT

In the three months ended December 31, 2023, the REIT’s overall revenue decreased 5.8%, to $25.8 million from $27.3 million a year earlier. Its occupancy rate at the end of the quarter was 82.0%. Cash flow fell 24.4%, to $14.6 million from $19.3 million. However, due to fewer units outstanding, cash flow per unit rose 2.7% to $0.38 from $0.37.

In 2024, the REIT plans to focus on leasing more of its properties, reducing its overall risk and finding additional ways to add value for investors.

That should also lift its projected cash flow by about 3%, from $1.42 a unit in 2023 to $1.46 in 2024. The units trade at a moderate 7.5 times that 2024 estimate.

Recommendation in Power Growth Investor: Dream Office REIT is a buy.

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Scott Clayton

Scott is an associate editor at TSI Network. He is the lead reporter and analyst for Dividend Advisor, Power Growth Investor and Canadian Wealth Advisor and a member of the Investment Planning Committee. Scott began his investment and financial career working with Pat McKeough at The Investment Reporter in the 1980s. Subsequently, he worked at the Financial Post Corporation Service for 10 years. He joined TSI Network in 1998. He is a Bachelor of Economics graduate of York University, and he also has an M.B.A. from the Schulich School of Business.

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