If you’re looking for a steady stream of passive income, Dream Industrial Real Estate Investment Trust (TSX:DIR.UN) could be a great option. This real estate investment trust (REIT) not only provides investors with a high 6.04% dividend yield. It also pays that dividend every single month, ensuring a reliable flow of cash. For income-focused investors, that kind of consistency is hard to beat.
The REIT
Dream Industrial focuses on industrial properties across Canada, the U.S., and Europe. With a portfolio of 338 assets totalling approximately 71.9 million square feet of leasable space, it is well-positioned in a sector that has been growing rapidly. Thanks to the rise of e-commerce and supply chain modernization. Companies need warehouses and distribution centres more than ever. And Dream Industrial has been able to secure long-term tenants, keeping its properties in high demand.
The dividend stock’s latest earnings report for the third quarter of 2024 highlighted its steady performance. Funds from operations (FFO) increased by 4% year over year to reach $0.26 per unit, showing that the REIT continues to generate strong cash flow. Net income came in at $13.8 million, lower than the $50.5 million reported in the same quarter last year. Yet this was mainly due to non-cash fair value adjustments rather than any operational weakness. More importantly, the trust reported a high occupancy rate of 95.5%. This is a clear sign that demand for its properties remains strong.
Stock performance has been a bit of a rollercoaster. It is currently trading below its book value, with a price-to-book ratio of 0.79, suggesting that the dividend stock may be undervalued relative to the actual worth of its assets. Investors looking for a bargain could see this as an opportunity to buy a high-quality REIT at a discount.
A strong dividend
What makes Dream Industrial particularly attractive is the sustainability of its monthly dividend. The trust pays $0.0583 per unit each month, adding up to an annual total of $0.70. With a payout ratio of about 80% of its FFO, the distribution is well-covered, making it more stable than REITs that pay out closer to 100% of their cash flow. This balance between rewarding investors and keeping funds for future growth is a positive sign for long-term sustainability.
Future growth prospects for Dream Industrial remain strong. The REIT continues to expand its portfolio through strategic acquisitions and developments, focusing on high-growth markets. It recently secured a 10-year lease for a 70,000-square-foot property at the Abbotside development. Plus, it has a 300,000-square-foot lease at its Balzac development. These long-term agreements provide stability and reinforce the trust’s ability to maintain high occupancy rates while steadily increasing rental revenue.
Bottom line
For investors comparing their options, Dream Industrial stands out among monthly dividend payers. While some REITs offer slightly higher yields, Dream Industrial’s focus on industrial properties makes it a solid long-term investment. It also offers a combination of income and growth potential, giving investors both steady monthly payments and the possibility of capital appreciation.
There are always risks to consider, such as higher interest rates that could impact REIT valuations or economic slowdowns that could hurt tenant demand. However, Dream Industrial has positioned itself well by maintaining a strong balance sheet, locking in long-term leases, and diversifying its portfolio across multiple countries. These factors help mitigate some of the risks that come with investing in real estate.
For those looking to add a reliable passive-income stock to their portfolio, Dream Industrial REIT is certainly worth considering. With its strong fundamentals, high occupancy rates, and a sustainable monthly dividend, it offers both stability and growth potential. While no investment is completely risk-free, this REIT provides a compelling case for long-term investors who want regular cash flow without sacrificing quality.
