Investing in the stock market offers various strategies and options to grow one’s wealth. While growth investing has its allure, many Canadians have embraced dividend investing as their preferred strategy. The allure of consistent income from dividend-paying stocks, such as Canadian Apartment Properties REIT (TSX:CAR.UN), has made it a top choice among investors.
In this article, we’ll explore the reasons why many Canadians prefer dividend investing over growth strategies. Further, we’ll consider why CAPREIT is an excellent option for income-seeking investors.
Steady income and stability
One of the primary reasons Canadians prefer dividend investing is the consistent income it provides. Dividend-paying stocks like CAPREIT distribute a portion of their profits to shareholders in the form of dividends. This steady stream of income can be especially attractive for retirees or investors looking for a source of passive income. The dividend stock currently offers a dividend yield of 3.21%, making it an appealing choice for income-seeking investors who want to see their investments pay them back.
Dividend stocks, particularly those from well-established companies like CAPREIT, are often associated with safety and stability. The dividend stock boasts a debt-to-equity ratio of 73.36%, indicating a prudent approach to financial leverage. This level of debt is considered manageable, and it suggests that the company is not over-leveraged, which can be a risk for growth-focused companies with high levels of debt. For risk-averse investors, this safety factor is a significant draw, knowing that their investments are in companies with strong financial foundations.
Value and growth
Dividend investing often aligns with a value investment approach. When we look at CAPREIT stock, it’s trading at 0.78 times book value. This means that it is trading at a discount to its book value. This can be an attractive proposition for value investors who aim to buy stocks at a price lower than their intrinsic value. The combination of a low price-to-book ratio and a dividend yield provides an excellent value investment opportunity.
While dividend investing focuses on income, it does not necessarily mean that investors forego the potential for long-term capital appreciation. CAPREIT’s shares have increased by 9.2% in the last year, demonstrating that dividend stocks can still offer growth opportunities. Investors can enjoy both the income from dividends and capital gains, creating a balanced investment strategy.
CAPREIT as an excellent option
CAPREIT is a compelling choice for dividend investors due to its attractive attributes. As mentioned earlier, it offers a dividend yield of 3.21%. This is higher than many traditional fixed-income investments, such as bonds and savings accounts, making it an appealing choice for income seekers.
Furthermore, the dividend stock’s strong operational performance is a testament to its resilience. Mark Kenney, the president and chief executive officer of CAR.UN, stated that the company’s Canadian residential portfolio maintained near 99% occupancy alongside strong and stable margins. This performance highlights the stability that income investors seek, as consistent occupancy and strong margins are crucial for generating the cash flow needed to sustain dividend payments.
CAPREIT’s strategic asset management program is another aspect that makes it a standout choice. The company has been selling non-strategic buildings and reinvesting the proceeds into newly built rental properties in thriving regions across Canada. This approach not only improves the quality of the portfolio but also serves a broader purpose by supporting the supply of new construction rental housing in Canada’s high-density and fast-growing cities.
Stephen Co, the chief financial officer of CAR.UN, emphasized the company’s commitment to creating value for its unitholders. CAPREIT’s actions, such as the NCIB program and mortgage re-financings, illustrate its dedication to enhancing shareholder value while maintaining financial prudence.
Many Canadians prefer dividend investing over growth strategies because it offers a steady income stream, safety and stability, value investment opportunities, and long-term growth potential. CAPREIT stands out as an excellent option for dividend investors. The dividend stock offers an attractive dividend yield, strong operational performance, and a commitment to enhancing shareholder value. For investors seeking a balance between income and growth, CAR.UN represents a compelling choice in the Canadian dividend stock market.