If you’re retired or soon to be, you probably know all about dividend stocks.
Providing consistent monthly cash income, they provide you with the peace of mind you need to retire in comfort.
But if you depend on dividend stocks for retirement, you face one problem:
Dividends usually only come in once per quarter. If you hold a diversified portfolio, you might get a little coming in every month, but even then, it will be an inconsistent amount.
So stocks that pay substantial cash every month are ideal. In this article, I will explore one such stock (or more accurately, REIT) that pays cash each and every single month, with a 4.3% yield.
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Granite REIT
Granite Real Estate Investment Trust (TSX: GRT.UN) is a Canadian industrial REIT that owns big box real retail space, distribution centres and manufacturing facilities. It owns assets across Canada, the United States and Europe. It makes money by renting storage space to companies that need to store goods or expand production lines. Granite REIT’s clients sign long-term leases, which gives the company a degree of revenue stability.
Historical performance
One way to begin looking at Granite REIT is to review its historical performance. Of course, past performance does not fully predict future performance – but it can provide clues toward management’s track record.
On growth, GRT.UN has done pretty well in recent years.
Over the last five years, the REIT has compounded its revenue at 12% and free cash flow at 24%. In the last year, the revenue growth was a little slower at 8%, and the FCF growth was actually negative. However, the company has great opportunities to capitalize on (e.g. diversification away from a major client it was once reliant on) that should cause a return to the historical trend.
GRT.UN’s profitability metrics, such as an 82% gross margin, a 75% EBIT margin and an 81% FCF margin, are generally good.
Dividend potential
GRT.UN currently pays a $0.30 monthly dividend. That dividend works out to $3.60 per year. The REIT units cost $84.50. Putting all this together, and we have the makings of a 4.3% yield. So, if you invest $100,000 into GRT.UN, you should get $4,260 per year, or $355 per month. Here’s the math on that.
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY |
| Granite REIT | $84.50 | 1,183 | $0.30 per month ($3.60 per year) | $354.90 per month ($4,285.80 per year) | Monthly |
The real estate landscape in Canada
The real estate landscape in Canada is one point that might not appear to be in Granite REIT’s favour. Following decades of uninterrupted bullishness and costs rising relative to incomes, Canada’s residential market is finally cooling. If we look at the trends being observed in employment and the extreme highs that Canadian real estate had reached at its peak, then we find reason to worry about the overall real estate market. However, Granite is not a residential REIT, but an industrial one, and Canada is expected to add considerable manufacturing and data centre capacity in the next few years. So I wouldn’t let the state of the residential market deter me from investing in GRT.UN. It seems like a decent opportunity today.
