Monthly Dividend Stock In Focus: Firm Capital Property Trust

Published on April 1st, 2025 by Felix Martinez

Firm Capital Property Trust (FRMUF) has three appealing investment characteristics:

#1: It is a REIT so it has a favorable tax structure and pays out the majority of its earnings as dividends.
Related:  List of publicly traded REITs

#2: It is a high-yield stock based on its 9.1% dividend yield.
Related: List of 5%+ yielding stocks

#3: It pays dividends monthly instead of quarterly.
Related: List of monthly dividend stocks

You can download our full Excel spreadsheet of all 76 monthly dividend stocks (along with metrics that matter like dividend yield and payout ratio) by clicking on the link below:

Firm Capital Property Trust’s trifecta of favorable tax status as a REIT, a high dividend yield, and a monthly dividend make it appealing to individual investors.

But there’s more to the company than just these factors. Keep reading this article to learn more about Firm Capital Property Trust.

Business Overview

Firm Capital Property Trust is focused on creating long-term shareholder value through capital preservation and disciplined investing.

In partnership with management and industry leaders, the REIT co-owns a diversified property portfolio that includes multi-residential, industrial, net-lease convenience retail, and core service provider professional space.

Firm Capital Property Trust has a history of 37 years, with presence in the real estate markets of Canada and the U.S. As its management directly invests in some assets of the REIT, its interests are aligned with those of the shareholders.

Source: Investor Presentation

Firm Capital Mortgage Investment Corporation reported strong financial results for Q4 and full-year 2024. Net income for Q4 rose 9.9% to $9.16 million, while annual net income increased 3.1% to $35.23 million. Earnings per share for Q4 improved to $0.249 from $0.242, though annual EPS declined slightly to $0.966 from $0.991 in 2023.

The investment portfolio expanded by 9.3% to $653.8 million, with new funding reaching $329.0 million, up from $249.5 million in 2023. The portfolio now includes 285 investments, averaging $2.3 million each, with 15 exceeding $7.5 million. The impairment allowance rose to $29.6 million from $22.7 million, reflecting management’s conservative approach to risk assessment.

The Corporation continues to offer a Dividend Reinvestment Plan (DRIP) and Share Purchase Plan, allowing shareholders to reinvest dividends or purchase additional shares commission-free. In 2024, declared dividends totaled $35.22 million ($0.9920 per share), slightly higher than in 2023. The number of outstanding shares increased to 36.73 million from 34.49 million, as the company maintains steady growth and investor returns.

Growth Prospects

Firm Capital Property Trust aims to grow via strategic accretive acquisitions. It partners with strong industry leaders who retain property management and execute partial acquisitions.

Firm Capital Property Trust boasts a defensive business model thanks to its tenants’ high credit profiles. However, investors should be aware that this is a slow-growth REIT.

Source: Investor Presentation

Since its inception in 1988, Firm Capital Property Trust has grown its net asset value per unit by only 57%. In other words, the REIT has grown its average net asset value per unit by 1.3% per year since its inception.

It is important to note that the lackluster performance record has resulted partly from strengthening the USD vs. CAD. As the Canadian dollar has depreciated by about 18% over the last decade, it is evident that Firm Capital Property Trust has faced a strong currency headwind in its results over the last decade.

Moreover, central banks have raised interest rates aggressively in the last two years to cool the economy and restore inflation to their target range. Higher interest rates have increased Firm Capital Property Trust’s interest expense by 50% in the last two years.

As inflation seems to have finally moderated, central banks will likely reduce interest rates in the upcoming years.

Given Firm Capital Property Trust’s solid business model, lackluster performance record, and currency risk, we expect the REIT to grow its FFO per unit by about 2.0% per year on average over the next five years.

Dividend & Valuation Analysis

Firm Capital Property Trust currently offers an above-average dividend yield of 9.1%. It is an interesting candidate for income-oriented investors. Still, the latter should be aware that the dividend may fluctuate significantly over time due to the exchange rate fluctuation between the Canadian dollar and the USD.

Moreover, the REIT’s elevated payout ratio of 95% greatly reduces the dividend’s margin of safety.

As a result, investors should not expect meaningful dividend growth going forward. It is also important to note that the dividend has been frozen over the last three years. Overall, the dividend may be cut during an unforeseen downturn, such as a deep recession.

About the valuation, Firm Capital Property Trust has traded for 11.5 times its FFO per unit in the last 12 months. Given the REIT’s high debt load, we assume a fair price-to-FFO ratio of 10.0 for the stock.

The current FFO multiple is slightly lower than our assumed fair price-to-FFO ratio. If the stock trades at its fair valuation level in five years, it will enjoy a 1.6% annualized return gain.

Considering the 1% annual FFO-per-unit growth, the 9.1% dividend, and a 2% annualized compression of valuation level, Firm Capital Property Trust could offer an 8.1% average annual total return over the next five years.

This is not an attractive expected return, though we recommend waiting for a better entry point to enhance the margin of safety and expected return.

Moreover, the stock is suitable only for investors who are comfortable with the risk that comes from the trust’s high payout ratio and material debt load.

Final Thoughts

Firm Capital Property Trust has a solid business model thanks to its competent management and the alignment of interests between its management and its shareholders. Management invests in the REIT’s properties, which is a significant advantage for the shareholders.

Despite its high payout ratio, the stock offers an exceptionally high dividend yield of 9.1%, making it an attractive candidate for income-oriented investors’ portfolios.

On the other hand, investors should be aware of the risks related to the trust’s high payout ratio and leveraged balance sheet. If inflation surges again, then high interest rates will greatly burden the REIT through high interest expenses.

Additional Reading

Don’t miss the resources below for more monthly dividend stock investing research.

And see the resources below for more compelling investment ideas for dividend growth stocks and/or high-yield investment securities.