If you wanted to earn $600 monthly in passive income, you would need to invest about $144,000 in a stock that paid a 5% annual dividend. But if you invested in True North (TSX:TNT.UN), which yields a hefty 8.85% dividend, you’d need to save just $81,356 to realize your financial objective.
True North is an open-ended real estate investment trust (REIT) that owns and operates commercial properties in urban and select strategic secondary markets across Canada.
Some say REITs are risky investments, however, because the cash flow from their operating activities depends on the occupancy level of the investment properties, the rental rates on leases, and the collectability of rent from tenants.
A REIT’s cash flow also determines the sustainability of dividend payments. If the concerns mentioned are present, they could slow the growth rate of that REIT’s future earnings. But that doesn’t apply to True North.
Why True North?
Earning your desired monthly passive income will depend on your choice of investment. You can purchase True North for less than $10 and enjoy an 8.85% dividend yield. The $385.4 million REIT currently owns and operates a portfolio of 47 commercial properties in Alberta, British Columbia, New Brunswick, Nova Scotia, and Ontario.
True North’s revenue includes all the income earned from these prime properties, including rental income and other miscellaneous income paid by the tenants under the terms of their existing leases.
True North’s Q1 2019 revenue increased by 31% from Q1 2018, thanks to the acquisition of eight office properties and the sale of two industrial properties. The top 10 tenants, including Alberta Health Services, contribute 32.4% to the gross revenue.
On February 7, 2019, True North acquired a 100%-occupied, 107,100-square-foot office property at 360 Laurier Avenue West, Ottawa, Ontario. The building is 95% occupied by the Federal Government of Canada. In addition, the property has a remaining lease term of three-and-a-half years.
With this latest acquisition, True North has a total portfolio of 47 properties. The REIT has renewed and leased out 19,600 square feet across the portfolio as part of its leasing activities. The average lease term is 8.4 years.
What is significant in Q1 2019 is that this largest portfolio in Ontario continues to experience positive growth in net operating income (NOI). In terms of occupancy rate, it went down to 96% in Q1 2019 from 97% in Q4 2018.
Investors needn’t worry. Management will continue to execute an aggressive acquisitions program, giving consideration to current economic and market factors.
This REIT targets diversified commercial real estate assets in urban cities across Canada. Its primary focus is on office, retail, and industrial properties with long-term leases. But what makes it a particularly viable investment option is its tenant profiles.
If you review True North’s existing tenants, you will see their profiles are strong. They are mostly government agencies and credit-rated tenants. These types of tenants have a low default rate. This is the stock that offers investors true value for money.
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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 Christopher Liew has no position in any of the stocks mentioned.