Another Reason for Retirees to Load Up on REITs!

After a failed sellout attempt, shares of Pure Multi-Family REIT LP (TSXV:RUF.UN) are trading at a huge discount!

On Friday of last week, shares of Pure Multi-Family REIT LP (TSXV:RUF.UN) declined by close to 10% after the company announced that it would end the efforts to be bought by a larger suitor. Essentially, investors seeking an arbitrage opportunity are no longer willing to stay the course, as the expected” buyout” was not going to materialize.

The new lower price per share is an incredibly attractive opportunity for those sitting on the sidelines willing to invest in very high-quality assets managed by a team with a winning record. As a reminder, the team that started this operation was very similar to the team at Pure Industrial Real Estate Trust, which was recently acquired by Blackstone. Clearly, the “smart” money stays close together.

As this name is expected to trade for a long time yet, investors must understand what they are getting for their money. As the monthly dividend is paid is U.S. dollars, the yield is no less than 5.3% at the current price of $8.50 per share. In addition, investors buying at these levels will receive an equal amount of tangible book value for each dollar that they put up. Essentially, shares are trading at their current liquidation value!

As the firm continues to come into its own and properties become fully rented (throughout the entire year), the payout ratio is beginning to stabilize, and the opportunity to reach a greater market is starting to become very true. At a current market capitalization of $675 million, the company can now focus on next steps, as it will need to stand on its own. Currently listed on the venture exchange, the graduation to the Toronto Stock Exchange will bring about many new potential investors.

In spite of no longer actively seeking a buyer, the company can still be a very profitable investment for many years to come — not only as an individual security, but also as part of the REIT sector. As interest rates have increased on several occasions, many investors are starting to shy away from this sector as it is mainly driven by income. To boot, the difference between a 5% yield and the risk-free rate of return has declined, as the risk-free rate has increased. To offset this, many REITs have seen declines in the share prices.

As is always the case, investors overweight the most recent news and don’t pay enough attention to future expectations. After seeing interest rates increase on several occasions, the federal reserve (both in Canada and the United States) will not be able to go much further without sending the country in bankruptcy. As a reminder, corporations are not the only ones in debt. Governments have also borrowed a lot of money!

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Ryan Goldsman has no position in any of the stocks mentioned. Pure Multi-Family REIT is a recommendation of Dividend Investor Canada.

More on Investing

A worker gives a business presentation.
Stocks for Beginners

2 Reasons to Buy Onex Stock Like There’s No Tomorrow

Onex (TSX:ONEX) stock has been a strong performer over the years, both in terms of growth and dividends that investors…

Read more »

Canadian Dollars
Stocks for Beginners

The Best Stocks to Invest $5,000 in Right Now

Are you looking to put some cash into the stock market? Here are three picks to put on your watch…

Read more »

calculate and analyze stock
Dividend Stocks

Got $1,000? 3 Dividend Stocks to Buy and Hold Forever

Dividend stocks like Restaurant Brands International (TSX:QSR) can pay substantial amounts of passive income.

Read more »

financial freedom sign
Bank Stocks

This Ridiculously Cheap Warren Buffett Stock Could Help Make You Richer

American Express stock is part of Warren Buffett's equity portfolio, and the stock trades at a steep discount in 2024.

Read more »

tsx today
Stock Market

TSX Today: What to Watch for in Stocks on Monday, February 26

After rising for two weeks in a row, the main TSX index is now at its highest level in more…

Read more »

stock analysis
Investing

Buy the Dip: 2 Stocks to Buy Today and Hold for the Next 5 Years

These Canadian stocks are trading at discounted valuations, providing an opportunity for buying the dip.

Read more »

bulb idea thinking
Investing

Safety in Size? 2 of the Bluest Blue-Chip Stocks I’d Buy Now

TC Energy (TSX:TRP) and another cash cow have huge dividend yields for safe investors.

Read more »

A cannabis plant grows.
Cannabis Stocks

Can Aurora Cannabis Stock Recover in 2024?

Aurora Cannabis stock is down 99% from all-time highs but remains a high-risk bet, despite its cheap valuation.

Read more »