If you’re looking for a reliable monthly dividend stock with a solid yield, Firm Capital Property Trust (TSX:FCD.UN) is worth a closer look. This mid-cap real estate investment trust (REIT) offers an attractive annual dividend yield of 9.1%, making it an appealing choice for income-seeking investors. While large-cap REITs often get the spotlight, mid-cap stocks like Firm Capital can provide strong dividend income alongside the potential for long-term capital growth. With a consistent payout history, diversified real estate portfolio, and strong financials, this dividend stock might just be a hidden gem in the Canadian market.
Make it monthly
One of the biggest advantages of Firm Capital Property Trust is its commitment to monthly distributions. Investors receive a dividend of $0.043 per unit each month, adding up to $0.52 per unit annually. At the current unit price of $5.70, this translates to a 9.1% dividend yield — well above the average for Canadian REITs.
Firm Capital has managed to maintain its dividend despite economic uncertainties, all thanks to its strong rental income and conservative payout ratio. Currently, its payout ratio stands at approximately 54.9%, showing that it is distributing just over half of its earnings as dividends. This leaves room for reinvestment, debt management, and potential future growth.
Into earnings
Firm Capital’s recent third-quarter (Q3) 2024 earnings report showcased steady growth and resilience. The dividend stock reported net income of $8.9 million — a significant increase from $5.6 million in the same quarter the previous year. Net operating income (NOI) also saw a 6% increase year over year, reaching $9.7 million. More importantly, adjusted funds from operations (AFFO) came in at $4.6 million, up 22% year over year.
Revenue for the trailing 12 months stands at $60.33 million, with a profit margin of 57.92% and an operating margin of 54.34% — both of which indicate strong profitability. While many REITs have struggled due to higher interest rates, Firm Capital has maintained profitability while keeping debt under control.
Offering value
Over the past year, Firm Capital’s stock price has dipped slightly by about 1.8%. However, this decline is far less severe than the broader Canadian REIT sector, which has seen a more pronounced drop of approximately 28.5%. This suggests that Firm Capital is more resilient than many of its peers, likely due to its stable cash flows and conservative debt management.
Yet a common concern for REIT investors is debt levels. Firm Capital’s total debt stands at $335.05 million, with a debt-to-equity ratio of 109.7%. While this might seem high, it is manageable within the REIT industry, where leveraging debt is a standard practice.
Currently, Firm Capital is trading at approximately 9.2 times its funds from operations (FFO), slightly below the industry’s fair price-to-FFO ratio of 10.0. Furthermore, its price-to-book ratio is just 0.69, indicating that the dividend stock is trading below the net value of its assets. This means the stock is potentially undervalued, providing a buying opportunity for long-term investors.
Foolish takeaway
For investors looking for a monthly dividend stock with a high yield, Firm Capital Property Trust (FCD.UN) is a strong contender. Its 9.1% dividend yield, steady earnings growth, diversified portfolio, and conservative payout ratio make it an attractive income investment. While the stock price has been relatively stable, its undervaluation presents a buying opportunity for long-term investors.
