It might seem counterintuitive to think about investing in real estate ahead of a market downturn. After all, while analysts now think that a recession won’t be as bad as the Great Recession a decade ago, there will still likely be a housing dip, and there will absolutely still be a recession of some sort.
But real estate investment trusts (REIT) are great opportunities for investors looking to find some extra passive income through dividends. Right now, with many investors fleeing the scene, it’s provided a perfect chance to buy up these REITs on the cheap. Not all REITs are alike, of course, so it’s important to look for the company that has the biggest potential for future growth.
That’s why today I’m looking at Cominar REIT (TSX:CUF.UN), which manages 334 office, retail, and industrial properties that total 38.4 million square feet throughout Quebec and Ontario, worth about $6.9 billion as of writing.
Now that sounds impressive, but it comes off the back of some hardships for this company. Only two years ago, Cominar was forced to start selling a lot of its assets. The company sold 100 properties in August 2017, followed by a further 97 properties in December 2017. This meant the company no longer had properties in Western Canada, Eastern Canada, or in the Toronto area. A huge blow that hit share prices yet again. What really hurt the company then was the closure of Sears Canada, which sent Cominar’s occupancy levels tumbling down. The company has been trading mainly down since about 2013, and it certainly didn’t help once the company made several dividend cuts.
But now, Cominar has cash in its pocket and is looking to improve, directing those funds it saved from dividends towards a share-buyback program. That program looks to repurchase more than 18 million shares, which means Cominar is looking to bet on itself in the near future.
It looks like Cominar is already on that path, as the company’s recent earnings results were promising. Cominar saw 2.2% growth in same property net operating income and committed occupancy rate to 93.9%. The company has also been in the process of restructuring, with $3.9 million that came from that goal by reducing the company’s workforce. Cominar even increased its same property net operating income from 1.5% to 2.5% for 2019.
All of this spells out that Cominar is looking to put money back into its pockets and therefore investor pockets as well. The company still has a long way to go, but it looks like rock bottom was already reached, and now things are looking up. Once the company has finished its restructuring process and has cash on hand, investors will likely see buybacks, followed by news of new projects coming down the pipeline.
As one of Canada’s largest REITs, Cominar isn’t likely to be going anywhere, especially after these latest results. And in fact, the company has been climbing this year, up 8% year to date as of writing. That’s definitely still far from its $25 share price, but Cominar is slowly back on the path towards it. In fact, analysts predict in the next 12 months the company could reach more than $15 per share, and don’t see it going any lower than its current share price. That makes today a perfect opportunity for investors to get in on this stock, and, of course, take advantage of the company’s strong 5.76% dividend yield.
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Fool contributor Amy Legate-Wolfe has no position in any of the stocks mentioned.