Karen Thomas: Granite Real Estate Investment Trust
Granite Real Estate Investment Trust (TSX:GRT.UN) offers us a top notch REIT with a healthy balance sheet, an attractive dividend yield of 4.48%, and strong growth opportunities.
Plus, it is trading at quite a cheap valuation level of approximately 1 times book value, making it an attractively valued REIT, especially considering its strong returns.
The drivers to stock price outperformance in the next year will be increasing diversification of its tenant base, continued strong returns on equity, the deployment of its low debt balance sheet for further expansion, and a re-valuation of the stock so that it trades more in line with its fundamentals and its peers.
We have already seen a big shift in the REIT’s concentration profile, with Magna and its subsidiaries moving from accounting for 94% of the REIT’s gross leasable area in 2011 to 42% today.
We have also already seen the strength in the REIT’s balance sheet, which currently has little leverage, an investment grade rating, and liquidity in excess of $1.1 billion.
And we have already seen the high returns that this REIT generates, with current ROE of almost 20%, return on investment of 13%, and return on assets of almost 13%.
Going forward, we can expect Granite to continue to use its balance sheet strength in order to drive long-term unit value.
Fool contributor Karen Thomas does not own shares of Granite Real Estate Investment Trust.