Some income investors prefer to invest in stocks that pay monthly dividends instead of the typical quarterly payments. Besides the advantage of reinvesting the dividends 12 times a year, not four, for faster compounding of capital, you can incorporate the dividends into your monthly budget.
Several dividend-payers on the TSX have monthly payout frequencies, especially in the real estate sector or real estate investment trusts (REITs). An absurdly cheap but profitable option today is BTB (TSX:BTB.UN). At only $3.43 per share (-4.12% year to date), the REIT pays a generous 8.9% dividend.
An investment of $13,483.33 (3,931 shares) in BTB will produce $100 in monthly passive income. The $293.6 million real estate company owns and operates industrial, off-downtown core office, and necessity-based commercial properties across Canada. BTB’s thriving business and impressive financial results in 2022 make it a compelling investment prospect this month.
Last year was harsh for the housing market, including REITs, because of high inflation and rising interest rates. Samuel Sahn, Portfolio Manager at Public Real Estate Investments, said, “It’s the anticipation of rate hikes that hurts REITs most. With uncertainty around the cost of borrowing, it is very difficult for markets to assess the value of the underlying real estate owned by REITs.”
Sahn adds, “Rates hikes don’t necessarily even need to reverse to shift the valuation paradigm, they just need to moderate or stop going up and be more predictable.” However, the 2023 Global Public Real Estate Outlook Report by Hazelview Investments said tailwinds could materialize in 2023
The situation in the previous year was frustrating, although Corrado Russo, the Senior Managing Director, Investments & Head of Public Real Estate Investments, see exceptional opportunities in 2023: “The best long-term returns are generated when buying at discounts to intrinsic value and investor sentiment is at its lowest, both of which are true today.”
BTB is worth considering for its well-grounded strategy amid a globally challenging environment. Its President and CEO, Michel Leonard, said 2022 was marked by the formal implementation of management’s strategic repositioning announced in 2021. The REIT aims to accentuate its growth through geographic diversification and more focus on industrial properties (60% by 2026).
In the 12 months that ended December 31, 2022, rental revenue and net operating income (NOI) increased 19.1% and 25% year over year to $119.5 million and $70.4 million, respectively. BTB has strong fundamentals, as evidenced by the high collection rate (99.3% of invoiced rent on a cumulative basis for 2022).
Management said the quality of BTB’s portfolio and the selection of solid assets s the results and secured investors’ revenue in 2022. Around 60% of the acquired properties (Ottawa and Edmonton) in 2022 were industrial properties.
Since the plan is to acquire more of this property type going forward, management is aware of the challenges regarding resource consumption, pollutant emissions, and hazardous waste. Thus, the main objective in 2023 is to prepare BTB’s first ESG report.
REITs aren’t typical core holdings in a stock portfolio but are perfect as second-liners. A real estate stock like BTB can help improve one’s diversification strategy while providing steady monthly cash onflows. Moreover, you get value for money at under $4 per share and fat dividends.