Category Monthly Dividend

Published on April 1st, 2025 by Felix Martinez

Freehold Royalties (FRHLF) has two appealing investment characteristics:

#1: It is a high-yield stock based on its 8.4% dividend yield.
Related: List of 5%+ yielding stocks.
#2: 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:

Combining a high dividend yield and a monthly dividend renders Freehold Royalties appealing to income-oriented investors. In addition, the company is ideally positioned to benefit from high production growth in exceptionally rich resource areas in North America. In this article, we will discuss the prospects of Freehold Royalties.

Business Overview

Freehold Royalties is focused on acquiring and managing royalty interest in crude oil, natural gas, natural gas liquids, and potash properties in Western Canada and the United States. The company was founded in 1996 and is headquartered in Calgary, Canada.

Freehold Royalties aims to deliver growth and attractive risk-adjusted returns to its shareholders by acquiring high-quality assets with acceptable risk profiles and long economic lives. It then tries to generate highly profitable lease-out programs for the development of its properties.

Freehold Royalties generates approximately 93% of its revenues from oil and natural gas liquids and the remaining 7% from natural gas.

Source: Investor Presentation

Moreover, the company generates 55% of its revenue from its properties in Canada and the remaining 45% from its properties in the U.S.

As an oil and gas royalty company, it is only natural that Freehold Royalties has exhibited a highly volatile performance record. The royalties that its new customers are willing to pay are greatly affected by the prevailing oil and gas market conditions and the underlying prices of oil and gas.

In addition, the oil and gas production of its existing customers significantly varies from year to year, as it is dependent on the prevailing oil and gas prices. Thus, it is not surprising that Freehold Royalties has posted losses in three of the last ten years.

Growth Prospects

Freehold Royalties currently enjoys decent business momentum. The company has grown its production by 38% over the last four years to a new record level.

Such a high production growth rate is extremely rare in the oil and gas industry. To provide a perspective, most oil majors, such as Shell (SHEL) and BP (BP), have failed to grow their output over the last several years. This is a key difference between Freehold Royalties and most oil and gas producers.

On the other hand, Freehold Royalties is inevitably sensitive to the oil and gas industry cycles. This is clearly reflected in the company’s volatile performance record. During the last decade, Freehold Royalties has failed to grow its earnings per share. In addition, the company has posted losses in three of the last ten years and negligible profits in three of the last ten years.

Freehold Royalties currently enjoys decent business momentum, not only thanks to its high production growth but also thanks to the deep production cuts implemented by OPEC in an effort of the cartel to support the price of oil. The price of natural gas has remained depressed this year, primarily due to an abnormally warm winter, but oil prices have remained above average. As a result, Freehold Royalties is likely to post above-average profits this year.

Given the decent business momentum and the cyclical nature of the Freehold Royalties business, we expect approximately flat earnings per share in five years from now.

Source: Investor Presentation

Dividend & Valuation Analysis

Freehold Royalties is currently offering an exceptionally high dividend yield of 8.4%, which is seven times as much as the 1.2% yield of the S&P 500. The stock is thus an interesting candidate for income-oriented investors, but the latter should be aware that the dividend is not safe due to the cyclical nature of the oil and gas industry.

Freehold Royalties is paying a generous dividend, but its earnings have decreased significantly vs. the 10-year high earnings per share of $1.03 in 2022. As a result, the payout ratio has risen from 68% in 2022 to 90%. Such a payout ratio is unsustainable over the long run.

Given its dramatic cycles, management should be praised for its pristine balance sheet, which is paramount in the energy sector. On the other hand, due to the inevitable swings in oil and gas prices, Freehold Royalties’ dividend is far from safe. Notably, the company has cut its dividend in three of the last ten years.

In addition, U.S. investors should be aware that the dividend received from this stock depends on the exchange rate between the Canadian and U.S. dollar.

In reference to the valuation, Freehold Royalties has traded for 12.4 times its earnings per share in the last 12 months. We assume a fair price-to-earnings ratio of 10.0 for the stock. Therefore, the current earnings multiple is much higher than our assumed fair price-to-earnings ratio. If the stock trades at its fair valuation level in five years, it will incur a -5.9% annualized drag in its returns.

Taking into account the flat earnings per share, the 8.4% dividend yield and a -5.9% annualized contraction of valuation level, Freehold Royalties could offer just a 2.5% average annual total return over the next five years. This is a low expected total return and hence we recommend waiting for a significantly lower entry point in order to enhance the margin of safety and increase the expected return from this highly cyclical stock.

Final Thoughts

Freehold Royalties has much better prospects in growing its production and reserves than most of its peers and offers an above-average dividend yield of 8.4%. The company also has a rock-solid balance sheet, which is likely to entice some income-oriented investors.

However, the company’s performance record has been highly volatile due to its business cycles, and it seems almost fully valued right now. Therefore, investors should wait for a much more attractive entry point.

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

Updated on April 2nd, 2025 by Felix Martinez

International REITs could be valuable for investors interested in diversifying their portfolios. Many international Real Estate Investment Trusts (REITs) are based outside the U.S. and have quality business models and high dividend yields.

One example is Granite Real Estate Investment Trust (GRP.U) (GRT-UN.TO), a Canadian REIT. Granite has a proven business model and pays a 5.6% dividend yield, which is about four times the level of the S&P 500.

Granite also pays its dividends monthly, which is a more attractive dividend schedule than REITs, which pay quarterly dividends.

Granite is one of 76 stocks that pay monthly dividends. You can access the full database of monthly dividend stocks (along with important financial metrics such as price-to-earnings ratios and dividend yields) by clicking on the link below:

Granite is listed in Toronto and New York, but for this article, we’ll use the New York listing and US dollars.

This article will outline Granite’s business model and discuss its merits as a dividend stock.

Business Overview

Granite owns and manages predominantly industrial real estate properties in North America and Europe. It converted to a REIT on January 3, 2013, and has transformed into a leaner, more efficient trust, with higher-quality assets.

Source: Investor presentation

Over time, Granite has grown from a smaller, less valuable portfolio that was almost entirely dependent upon one tenant (Magna), to a diversified, much larger portfolio with significantly higher average property values. The trust has undergone a transformation in recent years to reach these goals, and it is clear that the effort has paid off.

The trust’s income-producing portfolio consists of Multi-Purpose, Logistics and Distribution Warehouses, and Special-Purpose facilities. It owns a total of 63.3 million square feet spread across 143 properties in Europe, Canada, and the U.S. Combined, these properties have a carrying value of about $8.9 billion.

Source: Investor presentation

Granite is present only in countries with little or no geopolitical risk and in properties and industries with strong long-term fundamentals. It is still heavily concentrated in the US and Canada, with a little more than two-thirds of its property’s square footage in North America.

Still, its international exposure provides a diversifying component to the trust’s results. Granite focuses on properties that support e-commerce development and are located strategically to support such businesses in the best markets.

Source: Investor presentation

Granite seeks out areas that have proximity to major cities and have favorable demographics, including significant infrastructure and available labor pools. In addition, it already owns modern properties, meaning capital expenditure needs are low, with tenants with high switching costs.

These characteristics mean that Granite chooses only the most favorable properties to own, with long-term tenants who have the best chance of thriving in various economic climates. Finally, it focuses on the enormous shift to e-commerce, focusing on food and pharmaceuticals.

Granite REIT reported strong Q4 and full-year 2024 results, with net operating income (NOI) rising to $121.2M (+$11.2M YoY). Same-property NOI grew 6.3%, while funds from operations (FFO) increased to $92.7M ($1.47/unit) from $81.2M ($1.27/unit). Adjusted FFO (AFFO) reached $78.8M ($1.25/unit), improving the payout ratio to 66%. Annual FFO and AFFO rose to $343.9M and $307.1M, respectively, reflecting higher lease income and contractual rent adjustments.

Granite expanded with a 12-year, 391K sq. ft. lease in Houston, expected to yield 7.5% by Q4 2026. Q4 saw 1.07M sq. ft. of new leases at a 14% rental spread. Occupancy stood at 94.9%, with a committed rate of 95%. The Trust repurchased 482.1K units under NCIB and issued $300M in senior debentures. Moody’s withdrew Granite’s credit ratings at the Trust’s request.

Sustainability and financing remained priorities, with $1.19B in Green Bond proceeds allocated to eco-projects. Investment properties increased to $9.4B, with $53M in fair value gains and $287.5M in FX-driven appreciation. Granite’s disciplined capital management and development pipeline position it for continued growth.

Growth Prospects

Granite’s outlook is positive from a fundamental perspective, with the trust in the midst of a transformation. Granite is in the final stages of its years-long transformation in which it is optimizing its cost of capital, leverage on the balance sheet, and reaching what it considers a saturation point in critical target markets.

In recent years, the trust has experienced significant transition, switching out its CEO, board, and leadership team. Today, the trust is focused on transforming its portfolio through the sale of non-core assets, enhancing its presence in the U.S., and making purchases in select European markets.

Granite appears to have achieved its growth goals earlier than expected, and as a result, we expect incremental investment to slow somewhat in the coming years. A development pipeline is still in progress, with some properties in Europe and North America. However, Granite’s transformative moves have largely been completed.

Granite’s growth outlook is favorable, given that it should continue to see higher rent prices and a larger investment book through acquisitions and development.

Dividend Analysis

Granite currently pays a monthly dividend of $0.28 per share in Canadian dollars, which equates to ~$0.19 monthly in US dollars.

On an annualized basis, the current regular dividend payment is $3.36 per share in Canadian currency. In U.S. dollars, this works out to roughly $2.28 per share. This equates to a 5.6% yield.

If U.S. investors own the stock, returns will be subject to currency risk as it is translated from Canadian dollars to U.S. dollars. The dividend to U.S. investors will depend in part upon prevailing exchange rates, which currently stand at $1 CAD = $0.70 USD. Another important consideration for investing in international stocks is withholding taxes.

Note: As a Canadian stock, a 15% dividend tax will be imposed on US investors investing in the company outside of a retirement account. See our guide on Canadian taxes for US investors here.

Granite’s 5.6% dividend yield is supported by underlying cash flow. Based on the adjusted FFO for 2025, Granite’s payout ratio is 67%. That is slightly below previous years and considered safe in the REIT universe.

We believe Granite will grow FFO in the coming years and reduce the payout ratio, so in conjunction with the current fair payout ratio, we see the distribution as safe.

Final Thoughts

Investors can receive high levels of income and diversification benefits by considering REITs based outside the United States. Granite REIT is a good example of an international REIT with a high-quality business model, and a fair dividend yield of 5.6%.

The trust has largely completed its transformation effort, which diversified its portfolio, reduced risk, and enhanced its earnings growth prospects. As the payout ratio has been reduced significantly, we see this as supportive of future dividend increases. As a result, Granite remains an attractive option for investors looking for monthly dividends and a 5%+ dividend yield.

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.

Itaú Unibanco’s strategy of trying to be everything to every consumer and business isn’t unusual in the world of banking. The major US banks have adopted a similar strategy over time, providing core banking services like deposits and loans, but also insurance products, equity investing, and a host of other products to help attract customers.

However, what sets Itaú Unibanco apart is its exposure to emerging economies rather than established ones in Europe or the US.

Indeed, Brazil’s economy has struggled for many years, and many of the other countries Itaú Unibanco operates in similar, if not worse, situations.

This is a primary concern for us regarding the company’s ability to grow because a bank’s business model requires broad economic growth for its own expansion. Without this growth, Itaú Unibanco will have a difficult time producing profit expansion.

On February 6th, 2025, Itaú Unibanco reported its fourth-quarter and full-year results for 2024. The company’s recurring managerial result reached R$10.9 billion, up 2.0% from the previous quarter, with a 22.1% return on equity.

The loan portfolio grew 6.3% overall and 5.8% in Brazil, driven by mortgage (+5.6%), vehicle financing (+1.8%), and credit card loans (+6.8%). Small and medium-sized business loans rose 8.1% due to foreign exchange effects and government-backed financing. Corporate lending increased 6.8%.

Higher lending and an improved liabilities margin led to a 3.7% rise in the financial margin with clients, while credit costs rose 4.8%. Nonperforming loans over 90 days (NPL 90) improved to 2.4%, with similar gains in short-term delinquency rates.

For 2024, the recurring managerial result grew 16.2% to R$41.4 billion, with a return on equity of 22.2%. Pre-tax income rose 19.7% to R$60.5 billion, while the loan portfolio expanded 15.5% overall and 14.3% in Brazil. Growth in lending, higher margins, and structured operations drove a 7.1% increase in financial margins with clients. The cost of credit fell 6.6%, saving R$2.4 billion. Commissions and fees grew 7.2%, while the insurance and pension segment rose 13.8%.

Non-interest expenses increased 6.8%, but core costs rose just 4.4%, below the 4.8% inflation rate. The efficiency ratio hit record lows at 39.5% overall and 37.7% in Brazil. Shareholder returns included R$18.0 billion in distributions—R$15.0 billion in dividends and R$3.0 billion in share buybacks—bringing the 2024 net payout ratio to 69.4%.

Source: Investor Presentation

Dividend Analysis

Itaú Unibanco takes a conservative approach to dividend payments. The bank pays dividends to shareholders based on its projected earnings and losses, with the goal of being able to continue to pay the dividend under various economic conditions.

On the plus side, the relatively low yield affords the bank better dividend coverage as the payout ratio is in the teens. We, therefore, do not see any risk of a negative change in the dividend policy today, but we are also cautious about future growth given the uncertain outlook for Brazil’s economy.

Source: Investor Presentation

Thus, we do not believe income investors should be interested in Itaú Unibanco stock due to its fairly low yield and the elevated geopolitical and macroeconomic risk factors.

Final Thoughts

We see a difficult road ahead for Itaú Unibanco. With low projected earnings growth under normalized conditions and a diminutive dividend yield, we don’t view this stock as attractive.

Furthermore, buying international stocks carries multiple unique risk factors, including geopolitical and currency risks. Itaú stock provides geographic diversification for investors particularly interested in investing outside the United States.

However, the risks seem to outweigh the potential rewards for this stock. Given all of the above factors, we recommend investors avoid Itaú Unibanco, despite its monthly dividends.

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.

Updated on April 2nd, 2025 by Felix Martinez

The Keg Royalties Income Fund (KRIUF) has two appealing investment characteristics:

#1: It is a high-yield stock based on its 8.4% dividend yield.
Related: List of 5%+ yielding stocks.
#2: 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:

The combination of a high dividend yield and a monthly dividend render The Keg Royalties Income Fund appealing to income-oriented investors.

But there’s more to the company than just these factors. Keep reading this article to learn more about The Keg Royalties Income Fund.

Business Overview

The Keg Royalties Income Fund is a limited-purpose fund that owns the Keg trademarks and related property purchased from Keg Restaurants Ltd (KRL). Keg Restaurants has built a premier steakhouse brand in Canada and an established presence in the United States.

The fund owns the rights to the brand and has granted KRL an exclusive license to use the Keg Rights in exchange for a monthly royalty payment equal to 4% of the gross sales of Keg restaurants.

In return for adding restaurants to the fund’s royalty pool, KRL receives the right to acquire units in the fund. KRL’s effective ownership of the fund has grown from 10.00% at the time of the IPO in 2002 to over 20% as of the end of 2024. Hence, the interests of the two entities are well-aligned.

The Keg Royalties Income Fund stands out as a “top-line” fund, with its revenue stemming predominantly from KRL’s restaurant sales and only minor operating and financing expenses curbing its net income. Additionally, the fund benefits from a secondary source of income.

This unique structure shields the fund from the fluctuating earnings and expenses associated with actually running the restaurants. As a result, the fund enjoys protection from inflation and a relatively predictable stream of royalties and interest, among other benefits.

Growth Prospects

Similar to other royalty funds of its type that we have analyzed, like the Boston Pizza Royalty Income Fund and the A&W Revenue Royalties Income Fund, the fund’s growth prospects and overall performance hinge on just two key factors. The first is the number of franchised restaurants in its royalty pool, while the second is the rate of growth in same-restaurant sales.

For context, at the start 0f 2004, the fund had 86 Keg restaurants in its royalty pool. By the end of 2007 and 2013, this number had grown to 95 and 102, respectively. Since then, activity in the royalty pool has been rather stagnant. At the end of 2020 and 2021, the fund had 106 restaurants in its pool, while by the end of 2023, it had added one more to its count of 105.

We expect very few annual additions to the fund’s royalty pool, as it appears the brand has reached peak scaling potential. In comparison to the Boston Pizza and A&W Royalty Funds, which primarily focus on fast-food brands and offer more significant growth potential, Keg’s high-end dining experience is more tailored to a smaller and more specialized demographic, resulting in a more contained expansion capability.

Source: Annual Report

Future price increases in line with inflation should slowly but gradually add to the fund’s royalty-eligible gross sales generated by KRL. Of course, foot traffic in the company’s restaurants and/or restaurant openings and closings could also sway results.

The Keg Royalties Income Fund reported a decrease in royalty income and Royalty Pool Sales for the year ended December 31, 2024, primarily due to an extra week of sales in 2023. Fourth-quarter Royalty Pool Sales were $188.2 million, down 7.1% from the prior year, while full-year sales declined by 3.0% to $719.5 million. Royalty income dropped 7.1% in Q4 to $7.5 million and 3.0% for the year to $28.8 million. Despite this, distributable cash increased to $2.97 million in Q4 and $14.17 million for the year, attributed to changes in non-cash working capital. The Fund maintained a strong financial position with $2.07 million in cash and a 94.2% payout ratio for the year.

Looking ahead, economic uncertainty remains a challenge due to high interest rates, inflation, and reduced consumer spending. The Keg Restaurants Ltd. (KRL) continues to prioritize maintaining high food quality and service standards while managing cost pressures. Despite a 1.8% decline in guest counts, KRL outperformed the broader full-service restaurant sector. Q4 operating profit for corporate restaurants rose to $12.9 million, and EBITDA grew to $10.4 million, reflecting strong cost management.

KRL’s strategic focus includes operational efficiency, guest retention, and brand strength, as reflected in a 1.1% increase in gift card sales. Forbes also ranked the company Canada’s best restaurant employer in 2025. KRL remains committed to delivering exceptional hospitality and sustaining its leadership in the premium steakhouse market.

Dividend Analysis

Aligned with the fund’s aim to distribute all its profits to unitholders, the payout ratio has consistently hovered around the 100% mark. In 2024, it stood at 59%, while in 2021, it was 121.5%. This was due to the fund’s decision to disburse extra cash that had been held back in 2020 due to the pandemic, which had resulted in a payout ratio of just 85.9% at the time. Still, management estimates that 99.78% of distributable cash has been distributed since its inception.

Investors should not expect distribution increases or “cuts,” but rather expect that each year’s total distributions per unit will vary based on the underlying gross sales of Keg-licensed restaurants.

We see limited distribution growth prospects moving forward, in line with our rationale regarding the fund’s overall growth. Apart from higher pricing over the years, we can see the fund generating more or less stagnant earnings and thus paying out rather stagnant distributions.

The current monthly distribution of C$0.09 translates to an annualized rate of C$1.08 (or US$0.78), implying a yield of 8.4%. This yield is rather substantial, but it also reflects investors’ expectations for limited dividend growth prospects.

It’s worth highlighting that the management’s approach appears to involve dividing the quarterly or yearly distributions into equal sums by forecasting the forthcoming cash flows, thereby creating a uniform distribution rate and ensuring consistency in payouts month after month.

Final Thoughts

The Keg Royalties Income Fund offers a hefty dividend yield, which makes it a compelling pick for income-oriented investors, along with the highly attractive frequency of its monthly payouts.

Its frictionless revenue model, which is directly tied to the restaurant’s gross sales in its royalty pool, offers protection from inflation and a dependable stream of profits, regardless of each individual restaurant’s profitability.

Provided that the Keg brand does not significantly change, we anticipate the company will continue to generate a stable stream of monthly distributions through reliable royalty and interest income.

However, compared to other trusts of this type we have analyzed, we anticipate that the scope for distribution growth is relatively restricted due to the paucity of new restaurant openings and the possible saturation of the brand.

Consequently, investors should prepare for the bulk of their returns to come from the dividend. Taking this into account, we believe the fund will not achieve annualized returns exceeding the mid-to-high single digits, which is in line with its current dividend yield.

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.

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.

Updated on April 2nd, 2025 by Felix Martinez

Business development companies, or BDCs, are attractive investment vehicles for income-generating investors. They generally distribute most of their earnings to shareholders and, as a result, typically have very high yields.

Gladstone Capital Corporation (GLAD) is a BDC with a current dividend yield of nearly 7.2%. It is one of more than 200 stocks with a 5%+ dividend yield.

You can see the full list of established 5%+ yielding stocks here.

Including Gladstone Capital, 76 stocks pay dividends each month versus the more traditional quarterly or semi-annual payment schedules.

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:

Gladstone Capital’s dividend yield is higher than the rest of the market. The S&P 500 Index, on average, has a dividend yield of just 1.3%.

However, a high yield is not enough if the underlying business is weak or the dividend is at risk of being cut. This article will discuss whether or not Gladstone Capital is a good investment option for income investors.

Business Overview

Gladstone Capital operates as a Business Development Company and invests in debt and equity securities, generating income primarily from its debt investments.

These investments are made via various equity (10% of portfolio) and debt instruments (90% of portfolio), generally with very high yields. Loan size is typically in the $7 million to $30 million range, with terms of up to seven years.

Gladstone Capital chooses targets in stable industries with sustainable margins, cash flows, and favorable growth characteristics.

The company focuses on non-cyclical and non-financial companies to avoid peaks and valleys in its target companies’ earnings. These companies have leadership positions in their respective industries, growth potential, and annual EBITDA between $3 million and $15 million.

Gladstone Capital’s stated goal is to keep paying its hefty dividends to shareholders. Therefore, it is critical that its investment portfolio continues to generate interest and dividend income and capital gains in excess of its operating and financial expenses.

It has a diversified portfolio, both in terms of deal sourcing and industry groups.

Equity investments include preferred or common stock. Gladstone Capital seeks to maintain a 90% – 10% split between debt and equity investments.

Gladstone Capital reported Q1 2025 earnings, with total investment income down 7.4% to $22M due to lower yields and principal balances. Expenses fell 15.9%, boosting net investment income to $11.2M ($0.50 per share). Net asset value (NAV) rose 1.6% to $21.51 per share, while net assets from operations dropped to $27M from $31.8M.

The company invested $107.2M in six new portfolio companies and $44.5M in existing ones. Realized gains of $57.8M supported a $0.40 supplemental cash distribution. Debt investments grew by $45.2M, with secured first lien assets accounting for 73.4% of total debt holdings.

Post-quarter, Gladstone saw $26M in debt repayments and made $38.3M in new investments. Common stock distributions totaled $0.495 per share. President Bob Marcotte noted strong investment exits and originations, enhancing NAV and future earnings.

Source: Investor Presentation

Growth Prospects

Rising interest rates are one of Gladstone Capital’s most compelling growth catalysts. The company benefits from higher interest rates because most of its debt portfolio is in variable-rate securities.

Looking further back, Gladstone has had a difficult time generating growth. Gladstone’s share issuances have funded higher NII in dollar terms but haven’t earned enough above its cost of capital to move the needle on NII-per-share. Given this history, we estimate Gladstone’s annual growth rate to be 1% for the next five years.

The yields on the company’s portfolio influence its ability to earn income, cover expenses, and pay distributions to shareholders.

Gladstone Capital will aim to continue growing its new investments and adding new companies to the total portfolio. Over time, the company’s portfolio yield has increased to 14%.

Despite the rising cost of funding, Gladstone has managed to increase its yield spreads. Gladstone’s portfolio continues to grow in dollar terms, and the higher spreads on a larger portfolio are leading to earnings growth.

Dividend Analysis

Gladstone Capital pays a monthly dividend, which allows shareholders to receive 12 dividend payments per year, more frequently than four quarterly distributions.

GLAD currently pays a monthly dividend of $0.165 per share, which is larger than its pre-pandemic levels.

The annualized dividend payout of $1.98 per share represents a current dividend yield of 7.2%.

We believe Gladstone Capital’s current dividend is sustainable. The Company has a solid track record of steady payouts, even during the Great Recession of 2008-2009. Thanks to its tax classification and favorable fundamentals, the company can maintain its high yield.

BDCs are required to distribute at least 90% of any taxable income. This eliminates income tax at the corporate level, allowing capital gains to be passed through to shareholders, similar to a REIT.

With a projected dividend payout ratio of 99% for 2025, Gladstone Capital’s dividend payout appears to be secure but without much cushion. BDCs will always have high payout ratios due to the tax rule of distributing nearly all of their income, but overall, the dividend coverage is tight.

This means the company may not be able to sustain a major economic downturn and maintain its dividend. As a result, if another significant financial crisis occurs, Gladstone Capital’s dividend could be in jeopardy.

Assuming continued economic growth, its dividend appears to be sustainable. However, the high payout ratio introduces a relatively high risk to its sustainability, particularly during a recession.

Final Thoughts

Investors should approach high dividend yields with caution. Although high yields are commonplace in the BDC asset class, many have cut their dividends over the past few years.

For its part, Gladstone Capital reduced its dividend modestly in 2020 but has since grown it above its pre-COVID level. For now, we do not believe another dividend cut is imminent.

However, investors must pay close attention to the company’s future earnings reports. It has a very tight payout ratio, and any significant deterioration in the performance of its investment portfolio could threaten the dividend.

Overall, Gladstone Capital is likely only attractive for income investors looking for high yields.

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.

While certain quarters will show large investment gains for U.S. Global Investors, we see the long-term business model as challenged. Therefore, we do not believe this company’s long-term growth prospects are particularly enticing.

However, this isn’t a new phenomenon, as the company has struggled for years with profitability. The company has investments that produce fairly sizable gains and losses in any particular quarter.

Currently, GROW is having success growing the topline, and we expect this will continue as incremental improvements in its network and brand power are made. With the current portfolio, the company is making large bets on precious metals, crypto, and airline funds.

Additionally, share repurchases could benefit the company and drive earnings-per-share growth. We estimate book value per share will grow at a low single-digit annualized rate in the medium term.

Source: Investor Presentation

Dividend Analysis

U.S. Global Investors has paid its dividend monthly for more than 15 consecutive years, which is a decent track record. At the current payout of $0.09 per share annually, the stock yields 3.5%. However, on a yield basis, U.S. Global Investors is far from attractive, although the company has tripled its dividend since the onset of the pandemic.

One important factor to note as well is that the company is not afraid to cut its dividend. GROW has cut its dividend several times over the past decade. In fact, the annual dividend per share was $0.24 in 2012, which is significantly higher than the current $0.08 per share.

The problem is that with a murky outlook for earnings growth, we believe dividend growth will also be fairly difficult to come by. On the plus side, with a clean balance sheet, we believe it can continue to pay the dividend for some time if it chooses to fund it with cash on hand rather than earnings.

In fact, the company has enough cash and short-term bonds on the balance sheet to theoretically pay the dividend for years without earnings. Thus, we believe the payout is likely safe at this point.

Final Thoughts

U.S. Global Investors has a tough road ahead of it. The company has to compete with other asset managers that are many times its size in an industry where scale means pricing power. This company has no scale or pricing power and is seeing rising operating costs.

Investors should always be mindful of unique liquidity risks and other factors when buying micro-cap stocks that have market caps below $100 million.

Its massive exposure to precious metals and natural resources, along with some other more speculative bets, are potential growth catalysts with immense upside potential but are also risky. Given this and the fact that the dividend track record is so poor, we think income investors should avoid this stock. However, for investors interested in growth, as the name implies, this could be an opportunity to invest in speculative plays such as precious metals, crypto, and airline funds.

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.

Updated on April 2nd, 2025 by Felix Martinez

Real Estate Investment Trusts have much to offer investors who desire higher investment income, including retirees. For instance, Gladstone Commercial Corporation (GOOD) is a REIT with a high dividend yield of 7.9%.

You can see the full list of 5%+ yielding stocks by clicking here.

Gladstone Commercial appears to be an attractive dividend stock, especially considering the available alternatives. The S&P 500 Index, on average, has about a ~1.3% dividend yield. Plus, Gladstone Commercial pays its dividends each month.

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:

However, Gladstone Commercial’s dividend is far from guaranteed. Its payout ratio is almost 85%, leaving little room for error in maintaining the dividend.

This article will discuss the trust’s business model and financial performance and explain why its dividend may be riskier than it first appears.

Business Overview

Gladstone Commercial is a Real Estate Investment Trust, or REIT, that invests primarily in single-tenant and anchored multi-tenant net leased assets. It owns 16.2 million square feet of office and industrial real estate in the U.S.

Gladstone Commercial has a very diversified portfolio. As of the end of December 2022, the trust’s portfolio consisted of 135 properties in 27 states, leased to over 106 different tenants in 19 industries.

Source: Investor presentation

The trust’s portfolio is typically geared toward long-term agreements. In addition, Gladstone Commercial enjoys high occupancy rates, including a current rate of 98.5%. Impressively, occupancy has never fallen below 95% since the trust’s IPO in 2003.

Approximately 53% of Gladstone Commercial’s tenants are rated investment grade or are the non-rated investment grade equivalent. This contributes to a high-quality portfolio of tenants that should weather minor economic downturns and preserve Gladstone Commercial’s rent streams.

Gladstone Commercial Corporation reported its fourth-quarter and full-year 2024 financial results. The total operating revenue for Q4 2024 was $37.4 million, down 4.7% from Q3. Net income declined by 38.6% to $7.2 million due to decreased property sales gains and higher impairment charges. Funds from operations (FFO) available to common shareholders were $15.3 million ($0.35 per share), a 5.6% drop from Q3. Core FFO fell 5.9% to $15.3 million ($0.35 per share), impacted by the absence of a prior quarter’s settlement gain.

For the full year, total operating revenue increased 1.2% to $149.4 million, while net income surged to $24.0 million from $4.9 million in 2023 due to reduced impairment charges. FFO reached $59.7 million ($1.41 per share), a slight 0.8% increase, while Core FFO rose 0.5% to $60.2 million ($1.42 per share). The company maintained a 100% rent collection rate and paid $1.20 per share in common dividends.

Key transactions included acquiring seven fully occupied properties for $26.8 million, selling seven non-core properties for $39.0 million, and issuing $75.0 million in senior unsecured notes at a 6.47% fixed interest rate. Gladstone also leased 1.8 million square feet of vacant space and renewed 1.1 million square feet, supporting long-term occupancy and cash flow stability.

Growth Prospects

The trust has generated impressive revenue growth in the past, but bottom-line growth has leveled off lately. This creates some uncertainty regarding the distribution’s safety. FY2025 core FFO expectations are flat.

Gladstone’s FFO-per-share has been between $1.40 and $1.60 for most of the past decade as the trust continues to issue new shares and debt to fund acquisitions. Still, those acquisitions fail to provide an economic gain for shareholders after accounting for share issuance and cost of debt. In other words, while the trust’s new properties provide growth on a dollar basis, when the cost of those acquisitions is factored in, it is essentially no gain on a per-share basis.

Given where the distribution is today, that could present a problem as the trust’s payout ratio is approaching 100%. However, despite the favorable fundamentals of the trust’s portfolio, its headwinds to earnings growth (dilution and operating expenses) are still very much present.

Still, the company has successfully grown its asset base at a double-digit annual compound growth rate in the last decade. And since 2003, the portfolio has maintained high occupancy exceeding 95%.

With limited lease expirations in 2025, the company is focused on growth. They are interested in increasing the portfolio’s industrial allocation. Currently, industrial properties account for roughly half of the portfolio. Office properties make up most of the remainder, with retail and medical offices rounding it out.

Dividend Analysis

Gladstone Commercial’s current monthly dividend payment is $0.10 per share. On an annualized basis, the dividend payment is $1.20 per share, which is good for a high 7.9% dividend yield.

The distribution has been stagnant at $0.125 per share monthly since January 2008, reflecting the trust’s struggles with growth. However, recently, the company decided to cut the dividend, reducing the monthly payment to $0.10 per share in January 2023.

To its credit, Gladstone Commercial has paid monthly dividends for more than 16 consecutive years, an impressive track record of consistent payouts.

Since Gladstone Commercial’s 2003 initial public offering, the trust has not missed a distribution or reduced it until recently, which is still pretty impressive for a REIT given the wide array of economic conditions that have existed in this time frame.

Another important consideration when buying dividend stocks is balance sheet strength.

Too much debt can jeopardize a trust’s dividends. On a positive note, Gladstone Commercial has worked to reduce its leverage significantly over the past several years and now has a balanced maturity schedule. Furthermore, its reduced dividend payout level will further ease the burden on its balance sheet.

Source: Investor Presentation

About 97% of Gladstone Commercial’s debt is either fixed-rate or hedged, which could help mitigate the impact of volatile interest rates.

In addition, significant maturities are several years away, meaning the trust has time to generate cash to pay them off or find better ways to refinance them.

If the trust’s fundamentals deteriorate over the next few years, there is a chance it may not be able to sustain its dividend, even at the reduced current level. We see this as the principal risk of owning Gladstone Commercial today.

Final Thoughts

Gladstone Commercial’s very high dividend yield is attractive and appears to be sustainable, at least in the near term, given the trust’s current level of FFO. The trust also enjoys high occupancy and strong rental rates.

As a result, investors will need to monitor the trust’s results closely to ensure FFO does not decline much from present levels. Indeed, even a modest decline could jeopardize the dividend.

Gladstone’s yield is attractive to income investors, but there appears to be little in the way of earnings growth. The monthly payment schedule is a bonus with the high yield, but investors must pay attention to results and monitor the payout ratio.

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.

Updated on April 1st, 2025 by Felix Martinez

SmartCentres Real Estate Investment Trust (CWYUF) 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 7.3% dividend yield.
Related: List of 5%+ yielding stocks

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

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

SmartCentres Real Estate Investment 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 SmartCentres Real Estate Investment Trust.

Business Overview

SmartCentres Real Estate Investment Trust is one of the largest fully integrated REITs in Canada. Its best-in-class portfolio consists of 195 strategically located properties in every province across the country. SmartCentres REIT has $11.9 billion in assets and owns 35.3 million square feet of income-producing, value-oriented retail space with 98.7% occupancy on owned land across Canada.

Source: Investor Presentation

SmartCentres REIT faces a secular headwind, namely consumers’ shift from traditional shopping to online purchases. This trend has remarkably accelerated since the onset of the coronavirus crisis, hurting many retail REITs.

However, SmartCentres REIT enjoys a key competitive advantage, namely the strong financial position of its tenants. The REIT generates more than 25% of its revenues from Walmart and more than 60% of its revenues from financially strong tenants, which offer essential services. This is a major competitive advantage, as it makes the REIT’s cash flows reliable and resilient to economic downturns.

The company reported strong financial and operational results for the fourth quarter of 2024. The company achieved a five-year high occupancy rate of 98.7%, with rental growth of 8.8% excluding anchors and 6.6% overall. Cash collections exceeded 99%, and same-property NOI rose 3.8% overall and 6% excluding anchors. Total NOI increased $12.3 million (9%), while FFO per unit fell to $0.53 from $0.59 due to a fair value adjustment. Adjusted FFO grew 9.8% to $0.56 per unit.

The company maintained its $1.85 per unit annual distribution with a 91.7% payout ratio. Adjusted debt to EBITDA improved to 9.6x, while the debt-to-assets ratio rose slightly to 43.7%. Liquidity stood at $833 million, with an unencumbered asset pool of $9.5 billion. The weighted average interest rate decreased to 3.92%, down 17 basis points.

Challenges include a short 3.1-year average debt maturity, which poses refinancing risks. Despite securing 9.8 million square feet of development approvals in 2024, market conditions could impact execution. The company expects 2025 same-property NOI growth to be at the lower end of its 3%- 5% guidance.

Growth Prospects

SmartCentres REIT can boast of having a defensive business model, thanks to the high credit profile of its tenants. On the other hand, REITs have failed to grow their FFO per unit over the last decade, as their bottom line has remained essentially flat.

It is important to note that the lackluster performance record has resulted primarily from strengthening the USD vs. CAD. As the Canadian dollar has depreciated by about 30% over the last decade, it is obvious that SmartCentres REIT has grown its average FFO per unit by about 2.7% per year in its local currency over the last decade.

Source: Investor Presentation

More precisely, SmartCentres REIT has 179 initiatives related to recurring income and 95 initiatives related to intensifying existing properties. Therefore, the REIT’s future looks brighter than it has in the past decade.

On the other hand, central banks are raising interest rates aggressively to cool the economy and thus restore inflation to its normal range. Higher interest rates are likely to significantly increase the interest expense of SmartCentres REIT, which is an important headwind to consider going forward.

Given SmartCentres REIT’s promising growth prospects but also its lackluster performance record, currency risk, and the headwind from high interest rates, we expect the REIT to grow its FFO per unit by about 2.0% per year on average over the next five years.

Source: Investor Presentation

Dividend & Valuation Analysis

SmartCentres REIT is currently offering an above-average dividend yield of 7.3%. It is thus an interesting candidate for income-oriented investors but the latter should be aware that the dividend may fluctuate significantly over time due to the gyrations of the exchange rates between the Canadian dollar and the USD.

Moreover, the REIT has an elevated payout ratio of nearly 100%, significantly reducing the dividend’s safety margin. On the bright side, thanks to its defensive business model and strong interest coverage ratio, the trust is not likely to cut its dividend in the absence of a severe recession. Nevertheless, investors should not expect meaningful dividend growth going forward. They should know that the dividend may be cut during an unforeseen downturn, such as a deep recession. We also note that SmartCentres REIT has a material debt load on its balance sheet.

In reference to the valuation, SmartCentres REIT has traded for 15.5 times its FFO per unit in the last 12 months. Given the REIT’s material debt load, we assume a fair price-to-FFO ratio of 12.0 for the stock. Therefore, the current FFO multiple is higher than our assumed fair price-to-FFO ratio. If the stock trades at its fair valuation level in five years, it will incur a -2.7% annualized drag in its returns.

Taking into account the 2% annual FFO-per-unit growth, the 7.3% dividend, and a -2.7% annualized contraction of valuation level, SmartCentres REIT could offer a 6.6% average annual total return over the next five years. This is a decent expected return, though we recommend waiting for a better entry point to enhance the margin of safety and the expected return. Moreover, the stock is suitable only for investors who are comfortable with the risk that comes from the high payout ratio and the material debt load of the trust.

Final Thoughts

SmartCentres REIT can generate most of its revenues from companies with rock-solid balance sheets. It thus enjoys much more reliable revenues than most REITs. This is an important competitive advantage, especially during economic downturns.

Despite its high payout ratio, the stock offers an exceptionally high dividend yield of 7.3%, making it an attractive candidate for income-oriented investors’ portfolios.

On the other hand, investors should be aware of the risk that results from the REIT’s somewhat weak balance sheet. If high inflation persists for much longer than currently anticipated, high interest rates will greatly burden the REIT. Therefore, only investors who are confident that inflation will soon revert to normal levels should consider purchasing this stock.

Moreover, SmartCentres REIT is characterized by extremely low trading volume. This means that it is hard to establish or sell a large position in this stock.

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.

Updated on April 1st, 2025 by Felix Martinez

Real Estate Investment Trusts, or REITs, give investors a hands-off way to participate in real estate’s economic upside. They have grown in popularity over time as income investors seek alternative strategies to generate portfolio income.

One side effect of the growing popularity of REITs is the emergence of specialized REITs, which focus on only one subsector of the real estate industry. For example, Dream Office REIT (DRETF) is the largest pure-play office REIT in the Canadian market, with a dominant position in office properties.

Dream Office stock has a high 5.6% current dividend yield. And, its dividends are paid monthly, instead of the traditional quarterly payout.

Monthly dividend stocks are rare. You can download our full list of all 76 monthly dividend stocks (along with relevant financial metrics like dividend yields and payout ratios), which you can access below:

The combination of Dream Office REIT’s dividend yield and monthly dividend payments will surely catch the eye of high-income investors.

This article will analyze the investment prospects of Dream Office REIT in detail.

Business Overview

Dream Office REIT is an open-ended Investment Trust that acquires and manages predominantly office properties in major urban areas throughout Canada, but primarily in downtown Toronto. The trust has a market capitalization of $220 million at current market prices. It is part of the Dream Unlimited family of real estate trusts, which also includes Dream Industrial REIT (DREUF).

Dream Office concentrates heavily on office space properties in Toronto. Approximately 82% of its portfolio is in Toronto, and the remainder is spread across multiple markets.

Toronto’s office space fundamentals are favorable, so Dream Office continues to concentrate its investments there.

Source: Investor Presentation

This is a significant change from just a few years ago when the portfolio was more diversified. Dream Office has taken the bold step of significantly decreasing its geographic diversification, but it has very good reasons for doing so.

Toronto has tremendously strong fundamentals for office space, including low (and declining) vacancy rates. This helps drive pricing higher and is why Dream has bet big on Toronto.

Dream Office REIT reported Q4 2024 results with occupancy rates dropping to 81.1% (committed) and 77.5% (in-place), down from 84.5% and 80.9% in Q3. Property values declined to $2.18B from $2.3B. Net rental income rose to $27.3M (Q4 2023: $25.8M), while FFO fell to $14.1M (Q4 2023: $14.6M). Net loss improved to $19.1M from $42.4M, but the distribution per unit was reduced to $0.25 from $0.50.

To strengthen liquidity, the trust sold 438 University Ave and is converting 606-4th Ave in Calgary into residential rentals. At 74 Victoria St, 54K sq. ft. was leased at $28.50/sq. ft., increasing committed occupancy from 46% to 67%, with negotiations underway for 50K more. Renovations are in progress to attract tenants. Year-over-year, in-place occupancy fell from 82.0% to 77.5%, mainly due to lease expirations and reclassifications.

Leasing activity remained strong, with 122K sq. ft. leased in Q4, including 43K in Toronto at $33.45/sq. ft. (5.5% above prior rates). Year-to-date, 710K sq. ft. of leases were executed, with Toronto averaging $33.84/sq. ft. (up 8.1%). Despite market challenges, Dream Office REIT continues to optimize its portfolio, improve occupancy, and enhance financial stability.

Growth Prospects

While Dream Office’s near-term environment remains challenging, we believe the company will return to growth as the operating climate normalizes. We expect annual FFO-per-share growth of ~1.6% over the next five years.

Dream’s growth prospects depend upon high occupancy rates in Toronto and rising rent prices. The trust put in place a strategic plan to capitalize on its new concentration in Toronto and invest for the future. Under this plan, the trust sold billions of dollars of non-core assets, shrinking its portfolio and generating cash proceeds in the process. It used this transformation to improve unit pricing as well as enhance its exposure to downtown Toronto.

The result has been a substantially smaller portfolio, but one that has a much higher rent base, allowing the trust to deleverage and afford it the ability to reduce the trust’s share count. This has not only improved the balance sheet but its funds-from-operations per share as well because the share count has dwindled.

In short, while we don’t see Dream Office as producing huge growth numbers in the coming years, it is well-positioned to continue to grow organically from higher base rents. Toronto’s office space fundamentals are sufficient to support this growth.

Dividend Analysis

Dream Office currently distributes a monthly dividend of C$0.833 per share (C$1 per share annualized). This represents an annualized payout of roughly $0.70 per share in U.S. dollars, good for a 5.6% current yield.

Dream cut its distribution in 2017, and the payout has been rather stagnant since then. Given the manageable payout ratio (expected at 35% for 2025), we don’t see a high risk of a further cut today. However, we do remain wary of the somewhat shaky fundamentals in the office property market.

We currently expect $2.00 in FFO-per-share for this year. The decline reflects softer occupancy compared to last year and higher interest rates, which will suppress the company’s profitability. Still, coverage remains adequate on the current dividend, so we don’t see further cuts as necessary.

Note: As a Canadian stock, a 15% dividend tax will be imposed on US investors investing in the company outside of a retirement account. See our guide on Canadian taxes for US investors here.

The 5.6% dividend yield is likely high enough to entice income investors. This is particularly true because Dream pays shareholders monthly instead of quarterly.

Final Thoughts

Dream Office REIT’s high dividend yield and monthly dividend payments make it appealing to income investors. However, its long-term fundamental outlook is rather uncertain in the face of a rising rate environment, and we see humble growth levels in the coming years. Additionally, shares appear overvalued at current prices, which would weigh on total annualized returns.

The 2017 dividend cut looms large for investors, but the dividend yield is now quite hefty following the stock’s recent decline. Further, the current payout is well covered, and we view it as safe, even with softer occupancy levels and rising interest expenses. Overall, though, the stock is not very appealing at this time due to a weak total return potential.

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.