Those looking for monthly passive income from real estate investment trusts (REIT) may have been disappointed during the recent earnings report from Allied Properties (TSX: AP.UN). The company reported earnings that were in line with estimates, but analysts now fear the immediate future of the company’s performance.
That being said, this could also be a strong time to consider the stock as a long-term investment — especially if you’re hoping for increasing monthly passive income. So, let’s look at what investors should consider with this stock.
Recent news
There have been a few announcements from AP.UN stock lately, from earnings to dividends and acquisitions alike. Most recently, AP.UN stock acquired larger stakes in two well-leased office properties. This was done to strengthen its portfolio quality. The company also grew its rental residential market through the purchase, as it entered the rental space. This will further offer more future growth and diversification.
However, the purchase certainly increases the company’s debt in the short term, leading to a sharp drop of around 9% after earnings. This could impact debt ratios as well as cash flow per unit moving forward. However, management expects these metrics should improve by late 2024 from property sales as well as future earnings from the properties.
In fact, the company is so convinced of future results that it announced the approval of a share buyback. This would be up to 10% of its outstanding shares, and could increase the value of remaining shares if done right.
Earnings
Then there are the earnings to consider. There were mixed results, as alluded to, for the fourth quarter and 2023 full year. Operating income was up 6% year over year, with a net loss going in from fair-value losses in investment properties. Occupancy rates and funds from operations (FFO) were both down slightly, with the average rent per square foot up slightly.
There was now guidance provided, as the REIT expects flat to slightly down FFO and same asset net operating income NOI) for the year. This comes down to uncertain economic conditions, though the company believes this should improve by the latter half of 2024.
Analysts saw these results as weaker than expected, believing the next year could see a 5% drop in FFO. But not all were so bearish, with some believing the company has a high-quality portfolio and is now undervalued, especially with a high dividend yield to consider and a strong balance sheet.
What you could get
If you’re looking at this and seeing an opportunity, let’s go over what you could get from an investment in AP.UN stock as of writing. Right now, you could gain a 10.32% dividend yield, with shares down 31% in the last year. Yet if you were to invest $5,000, this is what could happen should shares rebound to 52-week highs.
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY | PORTFOLIO TOTAL |
| AP.UN – now | $17.25 | 290 | $1.80 | $522 | monthly | $5,000 |
| AP.UN – highs | $26.25 | 290 | $1.80 | $522 | monthly | $7,612.50 |
As you can see, you could create returns of $2,612.50 and dividends of $522. That’s passive income of $3,134.50, coming out monthly at $261.21! As always, simply make sure this aligns with your own risk tolerance before diving in.
