Investors chasing steady income often overlook one simple detail: how often a company pays a dividend.
Most Canadian dividend stocks offer investors a quarterly payout. However, H&R Real Estate Investment Trust (TSX:HR.UN) pays monthly, and its yield is currently around 5.4%.
That combination, monthly cash and a yield well above the market average, has kept H&R REIT on the radar for income-focused investors.
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What H&R REIT owns
H&R REIT is one of Canada’s largest real estate investment trusts. It holds a mix of Canadian and U.S. properties spanning roughly 20.3 million square feet. Its portfolio includes residential apartments operating under the Lantower Residential brand, as well as industrial and office buildings.
The trust has spent the past several years shrinking its office exposure while growing its residential and industrial holdings.
CEO Tom Hofstedter noted on the call that office now makes up close to 10% of the portfolio, a sharp drop from where the company stood five years ago.
Office real estate has struggled since the pandemic reshaped how people work. Vacancies remain elevated in several markets and financing costs are higher than historical levels. By leaning into residential and industrial assets instead, H&R REIT is positioning its income stream around sectors with steadier demand.
One of the biggest changes at H&R REIT this year involves how it manages its Lantower apartment communities. On April 1, the trust handed property management duties over to Greystar, a large third-party residential operator.
Emily Watson, who heads the Lantower division, said the early results look promising. April lead volume rose 18% compared to the same month last year. Completed tours were up 13%, and approved leases jumped more than 70% year over year for the month.
Same-property net operating income for residential assets, measured in U.S. dollars, grew 2.3% in the first quarter compared to a year earlier. The growth is tied to two Dallas properties still filling up with new residents.
Occupancy dipped slightly, ending the quarter at 90.9%, down 1.2 percentage points from the prior quarter.
Watson attributed part of the decline to the disruption caused by switching management companies, a normal bump when a large operational change occurs. She expects occupancy to climb back as the transition settles in.
The Greystar switch is also expected to save the trust money. Watson pointed to management fee reductions and better group insurance rates, thanks to Greystar’s much larger scale.
Those savings, once expected to reach about $5 million this year, should flow through to both property-level expenses and corporate overhead.
Analysts forecast the REIT to report funds from operations (FFO) of $0.95 per unit, which should easily cover the annual dividend payout of $0.60 per unit.
Asset sales could fund buybacks and cover debt
H&R REIT is also working through a round of office property sales. Hofstedter said the trust expects to close deals on three properties, 26 Wellington, 25 Sheppard and the Gowanus site, sometime this quarter or next.
Combined, those sales and other planned dispositions could bring in around $500 million. Hofstedter said reaching $1 billion isn’t a realistic near-term target, but $500 million looks achievable.
Proceeds are expected to cover an unsecured bond maturing this year, meaning the trust likely won’t need to issue new debt to handle it.
Once those sales close, Hofstedter said the trust plans to consider share buybacks through its normal course issuer bid. That would mark a shift toward returning more capital directly to shareholders, in addition to the existing monthly dividend.
Looking further out, Hofstedter said a refreshed long-term strategic plan should be finished by the end of the year, once the office disposition process wraps up. At that point, the trust’s portfolio will center almost entirely on industrial and residential real estate.
