Income investors are always on the lookout for stocks that pay quality dividends. Cominar REIT (TSX:CUF.UN) pays a hefty dividend, but does that make it a good buy?
Cominar, headquartered in Quebec, specializes in commercial properties. It currently has a portfolio of approximately 570 properties across the country. Let’s take a look at how this company is doing.
Cominar by the numbers
Cominar’s net income has declined by 13.39% year over year to $0.36 per share last quarter. It currently has a net profit number of 26.92%, which is below the industry average. Its return-on-equity number sits at 6.15%, also below many of its peers. Over the last three years, earnings have declined by an average of 10.88% annually — worse than the industry average growth of 2.85%.
Not all numbers look so dire. Revenue growth has averaged 9.41% annually over the last three years — a little higher than the industry average of 8.54%.
The stock currently trades midway between its 52-week low of $11.84 and its 52-week high of $15.69. Analysts expect it to trade around the $14 mark over the next year, so there isn’t much room for growth if they are right. Earnings per share sit at $1.29. The REIT’s debt-to-net-equity ratio sits at 1.19, so the company has more debt than equity right now.
What Cominar is doing to improve its numbers
Cominar announced in August a plan to sell approximately 100 of its properties, including the Dixie Outlet Mall in Mississauga, Ontario. The company plans to use the money to pay down its debt, which ballooned after an acquisition spree that made it the third-largest diversified REIT in Canada and the largest commercial property owner in Quebec. It bodes well that the company is working to improve its balance sheet, which has resulted in many analysts listing this company as a buy.
Cominar’s dividend offering
Cominar has a good dividend yield. The company pays out cash dividends monthly. Its current payout sits at $0.095 per share for a dividend yield of 8.52%. This is a reduction though. Prior to August’s offering, Cominar was paying $0.1225 per month. In 2016 and 2015, the dividend yielded 9.99%, so while its current 8.52% looks great, this number is currently heading the wrong way for income investors.
Bottom line
Cominar has a good dividend yield, and it’s working to fix its debt problem. Many of its numbers are still concerning though, and the dividend yield is trending downward. Investors need to ask themselves if the dividend is worth the risks.
