A double-digit yield can be tempting, but it’s even better when it comes from a dividend stock with a clear plan to strengthen its balance sheet and grow over time. Allied Properties REIT (TSX:AP.UN), yielding around 10.5% right now, is one of those rare high-yield names I’m willing to hold for decades. It’s not without risks, but the mix of dependable distributions and a roadmap to improve fundamentals makes it stand out.
About Allied
Over the past year, Allied was in transition. The trust sold non-core assets to fund major urban development projects, and it’s in the final stages of a pipeline that began more than a decade ago. Big-ticket developments like KING Toronto, M4 in Toronto, and 400 West Georgia in Vancouver are now near completion. KING Toronto faced plenty of delays, but Allied and its partners expect to finish it exactly as designed by the end of next year.
The leasing progress was encouraging. The remaining 63,772 square feet of office space at 400 West Georgia is close to being leased to a large knowledge-based organization. In residential, 19 Duncan has leased 222 of its 464 units, and Calgary House is nearly full at 312 of 326 units. These are important milestones, as leased space translates directly into rental income and cash flow to support that hefty dividend.
The property sales program is a big part of the story. Allied sold seven non-core properties in 2024 for $229 million and has set a target of at least $300 million in additional sales for 2025. As of Q2, about $200 million of properties were under contract, with the remainder expected to close later this year. Proceeds will pay down debt, which should help improve leverage metrics and lower risk. The trust aims to have net debt below 10 times adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) by year-end, down from 11.9 times at the end of Q2.
Looking ahead
The financial results show a business holding steady despite headwinds. Rental revenue in Q2 was $145 million, down just 1.2% from last year. Operating income slipped 3%, but occupancy remains strong, and management still expects same-asset net operating income to grow about 2% in 2025. The challenge was higher interest costs from 2024’s acquisitions, which will weigh on funds from operations per unit this year. That’s part of why the payout ratio looks stretched on paper, but management’s focus on debt reduction should help over time.
From a valuation perspective, Allied’s units trade at less than half of book value, with a price-to-book ratio around 0.46. That’s a deep discount, reflecting market caution on office real estate. But Allied’s portfolio isn’t made up of generic suburban towers; it’s concentrated in urban knowledge-based markets where demand for modern workspace and mixed-use environments remains steady. The diversification into residential and amenity space adds another layer of stability.
There are, of course, risks. The macroeconomic environment is uncertain, and high interest rates could linger longer than expected, pressuring both property values and borrowing costs. Office demand has been changing, and while Allied’s urban properties are well-positioned, leasing momentum needs to keep up. The trust’s high leverage means it has less room to maneuver if market conditions worsen.
Bottom line
For income-focused investors, the appeal is obvious. A yield over 10% means meaningful cash flow from day one, and with monthly distributions, that income shows up regularly. The current price also bakes in a lot of caution, so if Allied delivers on its asset sales, debt reduction, and leasing goals, there’s potential for both income and capital appreciation over the long term. Even now, a $15,000 investment gets you $1,544, dished out monthly.
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY | TOTAL INVESTMENT |
|---|---|---|---|---|---|---|
| AP.UN | $17.46 | 858 | $1.80 | $1,544.40 | Monthly | $14,978.68 |
This isn’t a dividend stock for someone who needs absolute stability in the short term. But for those willing to hold through the ups and downs, collect a double-digit yield, and watch a quality portfolio of urban assets evolve, Allied Properties REIT is worth serious consideration. I’d buy with the expectation of holding for decades, letting the income compound and the strategy play out.
