This Is Way More Attractive Than Investing in a Property

Income investors should lock in a safe 8% yield from Brookfield Property Partners LP. (TSX:BPY.UN)(NASDAQ:BPY)!

| More on:

Right now, certain real estate stocks are trading at ridiculous basement prices. Particularly, Brookfield Property Partners (TSX:BPY.UN)(NASDAQ:BPY) is absolutely attractive. Instead of investing in a property, you can invest in Brookfield Property, which is much more diversified with about US$171 billion of assets under management.

High-yield real estate stocks are depressed

With the expectation of higher interest rates, many already high-yield real estate stocks have been pushed down even further, creating even bigger yields. Brookfield Property is lumped in with this group of real estate stocks — I believe wrongly so.

Brookfield Property stock lost about 23% in the last 12 months and 19% in the last three months, while Slate Office and American Hotel stock fell 23% and 33%, respectively. I’d warned about the latter two stocks in November.

BPY.UN Chart

BPY.UN data by YCharts. The price action of TSX:BPY.UN, SOT.UN, and HOT.UN in the last three months.

Why Brookfield Property’s 8% yield is safe

Brookfield Property isn’t the same as certain high-yield real estate stocks. It has the ability to maintain and even grow its dividend. It aims to increase its cash distribution per unit by 5-8% per year with a target payout ratio of about 80% of funds from operations. This payout ratio doesn’t include the margin of safety that arises from sales in mature assets.

urban office buildings

Brookfield Property is always on the lookout for value opportunities in the geographies that it operates in, including Canada, the United States, Brazil, Europe and the Middle East, and the Asia Pacific region. This way, it can aim for the highest risk-adjusted returns.

It looks for deals in capital-stressed markets, and it has the operational expertise to redevelop or re-position properties for higher returns (either raising rents or selling assets when they mature).

Most recently, Brookfield Property completed the acquisition of GGP, which owns 8% (122 million square feet) of the U.S.’s high-quality malls. GGP’s quality is evident by its recent net-operating-income-weighted occupancy of 95%. Brookfield Property can improve the retail properties, but it’s going to take time.

Investor takeaway

I believe Brookfield Property is the baby that is being thrown out with the bath water. As the company continues to execute its long-term value-creation strategy and increase its dividend, the stock will eventually turn around.

While gross rental yields in Toronto and Vancouver are roughly between 3.8% and 4.7% according to Statista, income investors can get a yield of about 8% from Brookfield Property. Real estate is a long-term investment. Investors need to treat Brookfield Property as a long-term investment, too. In my opinion, it’s a no-brainer to buy Brookfield Property to lock in a big, growing income.

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 Kay Ng owns shares of Brookfield Property Partners. Brookfield Property Partners is a recommendation of Stock Advisor Canada.

More on Dividend Stocks

A worker drinks out of a mug in an office.
Dividend Stocks

A Dividend Giant I’d Buy Over BCE Stock Right Now

The largest telecom company in Canada is brutally discounted, and the dividend yield is naturally up, but it's too risky…

Read more »

a man celebrates his good fortune with a disco ball and confetti
Dividend Stocks

Get Ready to Invest $7,000 in This Dividend Stock for New Year Passive Income

This is the year you get ahead, and maxing out your TFSA contribution is the best way to start.

Read more »

ways to boost income
Dividend Stocks

Buy 2,653 Shares of This Top Dividend Stock for $10K in Annual Passive Income

Enbridge is a blue-chip TSX dividend stock that offers shareholders a forward yield of 6%. Is it still a good…

Read more »

Blocks conceptualizing the Registered Retirement Savings Plan
Dividend Stocks

CPP at 70: Is it Enough if Invested in an RRSP?

Even if you wait to take out CPP at 70, it's simply not going to cut it during retirement. Which…

Read more »

a person looks out a window into a cityscape
Dividend Stocks

1 Marvellous Canadian Dividend Stock Down 11% to Buy and Hold Immediately

Buying up this dividend stock while it's down isn't just a smart move, it could make you even more passive…

Read more »

happy woman throws cash
Dividend Stocks

Step Aside, Side Jobs! Earn Cash Every Month by Investing in These Stocks

Here are two of the best Canadian monthly dividend stocks you can consider buying in December 2024 and holding for…

Read more »

chip with the letters "AI" on it
Dividend Stocks

The Top Canadian AI Stocks to Buy for 2025

AI stocks are certainly strong companies, and there are steady gainers in Canada as well. But these three are the…

Read more »

calculate and analyze stock
Dividend Stocks

2 High-Yield Dividend Stocks You Can Buy and Hold for a Decade

These stocks pay attractive dividends for investors seeking passive income.

Read more »