Are you looking for dividend stocks that pay cash each and every month?
If so, you might want to look at Canadian real estate investment trusts (REITs). While describing REITs as stocks might be stretching the definition of the word “stock” a bit — legally speaking, they’re more like funds — these real estate companies do trade on the stock market and pay high monthly dividends.
REITs are known for paying stable, dependable income over long periods of time. In recent years, they took a bit of a hit due to the Bank of Canada’s interest rate hikes. But now, with the Bank of Canada cutting rates, REITs have an opportunity to shine. In this article, I will explore one Canadian REIT that has a 6.4% dividend yield and pays cash every month.
Granite REIT
Granite Real Estate Investment Trust (TSX:GRT.UN) is a Canadian REIT that specializes in warehouses and industrial properties. Unlike retail and mall REITs, it is in a growth industry with good prospects. Grand View Research expects office and industrial space to grow at a compounded annual growth rate (CAGR) of 8.8% until 2030. If you look at what industrial office space is, it’s not hard to see that Grand View is likely correct about this.
Industrial office space includes things like
- Amazon warehouses;
- TEMU sorting centres;
- Wayfair warehouses;
- Magna International factories;
- And more.
Most likely, you recognize some of the names above. Some of them, like Amazon and Wayfair, are true household names. Others, like Magna, are less well known but large. These kinds of companies need lots of factory and warehouse space to do what they do. And Granite REIT is there to supply it to them, with 143 investment properties and 63.3 million square feet of leasable area.
Profitability
Granite REIT is a pretty profitable REIT. It boasts the following margins:
- An 84% gross margin
- A 61% funds from operations (FFO) margin
- A 39% free cash flow (FCF) margin
- A 56% net income margin
- A 3.3% return on assets and a 5.6% return on equity
The margins above are quite high and far above average for REITs as a class. The returns on assets and equity are satisfactory.
Growth
Another factor that Granite REIT has in its favour is growth. As mentioned previously, the company is leasing out office space to a very important growth industry, and that shows up in its own trailing 12-month growth numbers.
- Revenue growth: 6.6%
- Operating cash flow growth: 94%
- Operating income growth: 8.8%
These figures are quite good, and the company has similarly strong CAGR figures for the trailing 10-year period. For example, in the last 10 years, the company grew its revenue, earnings, and FCF at 10.25%, 21%, and 6%, respectively.
Valuation
Looking at all the things Granite REIT has going for it, you’d think it quite a pricey stock. But think again. The company’s stock trades at only 0.87 times book value and 13.72 times cash flow. It also has a 14 price-to-earnings ratio going by next year’s estimated earnings. Overall, Granite REIT looks like a decent bet.
