Here’s a high 10.8% yield from Allied Properties REIT

This REIT owns some of the best properties in Canada’s biggest cities. Despite the disruptions caused by the work from home and online shopping trends, its high-quality holdings should continue to attract tenants.

We’re not concerned about the recent slight cash flow hiccup as growing revenues should address any short-term fluctuations.

The stock trades at just 7.7 times the company’s forward cash flow forecast.

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ALLIED PROPERTIES REAL ESTATE INVESTMENT TRUST (Toronto symbol AP.UN; www.alliedreit.com) owns 198 office buildings and eight properties under development, mainly in major Canadian cities. Its occupancy rate is 87.0%.

The REIT has increased its stake in two office towers under development—one in Toronto and one in Vancouver— by buying some of the stake of partner Westbank Corp. As a result, Allied now owns 95% of the Toronto building, and 90% of the Vancouver project. In exchange, the REIT cancelled $198.0 million in loans it had extended to Westbank. It also paid $36.3 million in cash to Westbank. To help offset those costs, Allied plans to sell $200 million of less-important properties, mainly in Toronto and Montreal.

Dividend Stocks: Revenue grows despite interest rate challenge to cash flow

In the quarter ended March 31, 2024, the REIT’s revenue rose 3.7%, to $143.6 million from $138.5 million a year earlier. However, cash flow fell 1.0%, to $81.1 million from $81.9 million, on higher interest expenses. On a per-unit basis, cash flow was flat at $0.58 due to fewer units outstanding.

Allied last raised your monthly distribution with the January 2023 payment by 2.9%. The annual rate of $1.80 a unit yields a very high 10.5%. The REIT has an Above Average TSI Dividend Sustainability Rating.

Allied units currently trade at a low 7.7 times the REIT’s projected 2024 cash flow of $2.23 a unit.

Recommendation in Canadian Wealth Advisor: Allied Properties 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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