Are you looking for new stocks to buy in your TFSA in May?
If so, dividend stocks may be just what the Doctor ordered.
These days, tech stocks are getting rather pricey by traditional valuation metrics, often trading at 100 times earnings or more.
At the same time, dividend stocks are currently relatively cheap while paying stable and consistent dividends. Some of them – most notably REITs – also offer monthly payout schedules. In this article, I’ll explore one monthly pay dividend stock that just might be worth the investment in May.
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Granite REIT
Granite REIT (TSX:GRT.UN) is a Canadian retail REIT that operates logistical, industrial and warehouse properties. This is an especially valuable niche these days, when AI investments are driving demand for these types of properties. Granite has a number of high profile clients like Magna International (TSX:MG), which contribute to the company’s 97.5% occupancy rate.
Monthly payout schedule
Granite REIT, like many Canadian REITs, is a monthly pay stock. It pays a monthly dividend of $0.2958, which works out to $3.55 per year. With a unit price of $93.80, the REIT’s yield is 3.8%. If you were to invest $50,000 in the stock, you’d get about $1,892 in annual income, or $157 per month. Here’s the math on that.
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY |
| Granite REIT | $93.80 | 533 | $0.2958 per month ($3.55 per year) | $157.66 per month ($1,891.82 per year) | Monthly |
Performance
By many metrics, Granite REIT is performing well right now, boasting the following metrics:
- 26% year-over-year earnings growth.
- 8.6% year-over-year funds from operations (FFO) growth.
- 7.2% CAGR free cash flow (FCF) growth over the last three years.
- A 9.4% CAGR 10-year dividend growth rate.
The rates of growth in the above metrics vary, of course, but collectively, they paint the picture of a growing organization. But is it profitable?
By many metrics, yes.
Granite REIT scores well on profitability by several metrics, including these:
- An 82% gross profit margin.
- A 51% adjusted funds from operations (AFFO) margin.
- A 74% operating income margin.
- A 35% free cash flow margin.
- A 62% net income margin.
These metrics are excellent across the board – much better than the growth metrics – indicating that Granite is making a respectable amount of money.
Valuation
With all of the above out of the way, we can look at GRT.UN’s valuation metrics. These include:
- 15 times forward earnings.
- 1 times book value.
- 15 times cash flow.
- 18 times AFFO
- 15 times FFO.
Overall, these metrics are relatively low considering GRT.UN’s growth and profitability metrics. This stock is worth the investment if the company can keep up the results going forward.
The bottom line
Going by publicly available ratios and growth rates, as well as the basic nature of the REIT’s operations, Granite REIT appears to be a pretty good opportunity. It’s in an important and under-served part of the REIT world. It’s highly profitable. It has been growing its dividend consistently. And finally, it appears to trade at a sensible price. Overall, I’d say that GRT.UN is a decent opportunity for monthly income today.
