Allied Properties REIT (TSX: AP.UN) is a Toronto-based real estate investment trust (REIT) that is a leading operator of distinctive urban workspace in major Canadian metropolitan cities and network-dense UDC space in Toronto. Today, I want to discuss why this dividend stock has caught my eye as we move into the 2023 summer season. Let’s jump in.
How has this REIT performed over the past year?
Shares of this REIT moved down marginally on Monday, June 19’s trading session. Meanwhile, the stock has dropped over 10% so far in 2023. Its shares have plunged 34% in the year-over-year period as of pre-morning trading on Tuesday, June 20. Investors who want to see more of this dividend stock’s recent performance can play with the interactive price chart below.
Should investors be excited about the future for this dividend stock?
This REIT released its first-quarter (Q1) fiscal 2023 earnings on April 26, 2023. President and chief executive officer (CEO) Michael Emory praised Allied Properties’s performance in the face of continued macroeconomic challenges. Management credited “development completions” and a recent string of acquisitions with its continued profitability in the beginning of fiscal 2023.
Rental revenue climbed 14% year over year to $138 million in Q1 FY2023. Meanwhile, operating income also jumped 14% to $77.1 million. Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) increased 12% from the first quarter of fiscal 2022 to $102 million in this most recent quarter. Moreover, funds from operations (FFO) increased 5% year on year to $81.1 million while FFO per diluted unit dipped 3.6% to $0.581. Adjusted funds from operations (AFFO) jumped 4.1% to $74.4 million and AFFO per unit dropped 4.5% to $0.533.
Management credited Allied Properties’s operating income growth to the completion of development completions and contribution from the portfolio that was acquired from Choice Properties REIT. Occupancy rose marginally compared to the previous year while annualized net operating income (NOI) rose 3.9% to $34.9 million.
Total investment properties and investment properties held for sale climbed 4.3% year over year to $11 billion. Meanwhile, total assets increased 4.9% to $11.9 billion. Annualized adjusted EBITDA grew 12% year over year to $411 million.
Here’s why I’m chasing this monthly dividend stock today
There are advanced talks with Scotiabank and CBRE Canada to proceed with the sale of Allied Properties’s UDC portfolio. The sale would coincide with its overall strategy to proceed with low-cost capital. Allied Properties also aims to bolster its balance sheet and reduce its exposure to capital markets. After the sale, the REIT does not expect to pursue any acquisitions for the rest of the fiscal year.
Shares of this dividend stock are trading in favourable value territory compared to its industry peers. Meanwhile, this REIT offers a monthly distribution of $0.15 per share. That represents a superb 8% yield.
