Choice Properties Real Estate Investment Trust (TSX:CHP.UN) has been catching the eye of income-focused investors with its attractive dividend yield. As of writing, the real estate investment trust (REIT) declared a monthly distribution of $0.063 per unit, amounting to an annualized $0.76 per unit. With the current unit price hovering around $13.94, this translates to a yield of approximately 5.52%.
But, so what? Today, let’s look at how good that yield really looks. So, without further ado, let’s get into it.
The numbers
In its recent financial disclosures, Choice Properties reported a net income of $791.9 million for the quarter ending Dec. 31, 2024. A significant turnaround from a net loss of $445.7 million in the same period the previous year. This positive swing was primarily due to favourable fair value adjustments of the trust’s exchangeable units. Additionally, funds from operations (FFO) for the quarter stood at $188.2 million, or $0.26 per unit, marking a 2% increase compared to the same quarter in 2023.
The REIT’s portfolio occupancy remained robust at 97.6% during the fourth quarter of 2024, with retail properties at 97.6%, industrial properties at 97.9%, and mixed-use and residential properties at 94.1%. This high occupancy rate underscores the quality and resilience of their property portfolio, even amidst fluctuating market conditions.
Making moves
Over the year, Choice Properties completed approximately $425 million in real estate transactions, including $260 million in acquisitions and $165 million in dispositions. These strategic moves reflect the trust’s commitment to optimizing its portfolio and capitalizing on growth opportunities in the Canadian real estate market.
In January 2025, the Trust successfully issued $300 million in Series V Senior Unsecured Debentures. This capital infusion is expected to support ongoing development projects and strengthen the REIT’s financial position, ensuring continued growth and stability.
Future outlook
Analysts have taken note of Choice Properties’s performance. The trust is now ranked among the top 10 undervalued stocks in the real estate sector on the Toronto Stock Exchange. This recognition suggests potential for capital appreciation in addition to the steady income from dividends. It is a prime opportunity for investors looking to get in on a deal before it rises.
Looking ahead, Choice Properties anticipates a 2-3% year-over-year growth in same-asset cash net operating income and projects FFO per unit growth to be between $1.05 and $1.06 for 2025. The trust also aims to maintain a debt-to-earnings before interest, taxes, depreciation, and amortization ratio below 7.5, reflecting prudent financial management.
The REIT’s development pipeline includes advancing industrial projects at Choice Caledon Business Park and retail intensification programs. These initiatives are expected to contribute positively to the trust’s revenue streams and overall growth in the coming years.
Bottom line
Choice Properties REIT’s consistent dividend, strong financial performance, and strategic initiatives make it an attractive option for investors, especially those seeking stable income and potential growth in the Canadian real estate sector. As always, potential investors should conduct their own due diligence and consider their individual financial goals before making investment decisions. But Choice REIT, for now, certainly should belong on your watchlist.
