A 7.5% Dividend Stock Paying Cash Every Month, But Is it Enough?

If you’re an income investor, the words “monthly dividend” can feel like music to your ears. True North Commercial REIT (TSX:TNT.UN) offers just that, paying $0.0575 per unit each month, or about a 7.5% annual yield at the current $9.40 unit price. That’s a healthy payout in today’s market, especially when so many dividend stocks are trimming distributions. But as with any high-yield investment, the big question is whether the income is sustainable and if the business behind it is strong enough to weather bumps along the way.

Into earnings

Over the past year, the real estate investment trust (REIT) units edged higher by roughly 5%. That’s a modest but respectable gain given the challenges facing Canadian commercial real estate. True North focuses on office properties in urban and select secondary markets, with a particular emphasis on long-term leases to government and credit-rated tenants. In the first quarter (Q1) of 2025, about 74% of revenue came from those types of tenants, which adds a measure of stability to rent collections. Occupancy in its core portfolio hit 92%, above the average for many of the markets it operates in.

The first quarter of 2025 showed both strengths and weaknesses. On the plus side, the REIT completed 146,000 square feet of new or renewed leases, with an average term of 5.6 years and positive leasing spreads on renewals of 1.6%. Same-property net operating income rose 5.1%.

On the downside, revenue fell 4% and net operating income dropped 12% compared with the same quarter in 2024. This was mainly because of property sales last year and lower occupancy in assets marked for sale. Funds from operations and adjusted funds from operations also slipped year over year, though per-unit results were flat thanks to a reduced unit count from buybacks under the REIT’s normal course issuer bid.

Considerations

One notable development was the reinstatement of the monthly distribution in March 2025. While that’s good news for income seekers, it’s also important to note that the payout ratio, based on adjusted funds from operations, would have been about 30% if distributions had been in place for the entire quarter. That’s low by REIT standards and suggests the current payout is well-covered, at least for now. The challenge is whether the REIT can maintain or grow earnings in a soft office market to support that coverage over time. For now, investors can gain $515 annually from a $7,000 investment, or about $43 monthly!

Debt is another piece of the puzzle. True North has a relatively high debt-to-gross-book-value ratio of 61.7%, which is on the upper end for a REIT. However, management did a good job managing maturities. By the end of Q1, they had refinanced or renewed the majority of 2025 debt maturities, locking in average rates of 4.78% for a weighted average term of 3.6 years.

The risks here are tied to the broader office market. Even with a strong government and credit-rated tenant base, office demand has been under pressure. True North’s portfolio weathered these changes relatively well so far, but leasing momentum will need to continue to keep occupancy steady and rents inching higher.

Bottom line

For now, the monthly payout is enticing, the coverage looks solid, and the refinancing progress adds some comfort on the debt side. The upside case rests on the REIT maintaining occupancy and finding opportunities to backfill any vacancies with long-term, stable tenants. The downside risk is that weaker demand could erode NOI and eventually pressure the distribution.

In short, True North Commercial REIT offers an attractive monthly yield with a reasonable degree of stability for the moment. Whether it’s enough for a long-term hold will depend on how well management can navigate the evolving office landscape. For income-focused investors willing to accept sector-specific risks, it’s a name worth watching, and perhaps owning. Yet not one to buy without keeping a close eye on the fundamentals.