Real estate investment trusts (REITs, for short) give investors a hands-off method to participate in the economic upside of owning and operating real assets.
REITs have grown in popularity over time as yield-starved investors seek alternative strategies to generate portfolio income.
On side effect of the growing popularity of REITs is the emergence of specialized REITs, focusing on only one subsector of the real estate industry.
Dream Office REIT (DRETF) is one example of this trend. As the largest pure-play office REIT in the Canadian market, this trust has a dominant position in the office property space.
At the security level, Dream makes a highly compelling investment proposition for high income investors. There are two reasons for this.
First, the company has a 7.8% dividend yield. This is more than four times as high as the average dividend yield in the S&P 500 and makes Dream one of the few companies with a 5%+ dividend yield.
The second reason why Dream is attractive is that its dividends are paid monthly. Monthly dividends are ideal for retirees and other investors that require stable, predictable income from their investment portfolio. There are very few companies that pay monthly, rather than quarterly, dividends.
Dream Office REIT’s high dividend yield and monthly dividend payments will catch the eye of high income investors.
However, some due diligence reveals that the trust recently cut its dividend and it is undergoing a seismic shift to its fundamental business.
This article will analyze the investment prospects of Dream Office REIT in detail.
Business Overview
Dream Office REIT is Canada’s largest pure-play office REIT. The trust has a market capitalization of $2.0 billion at current market prices. It is part of the Dream Unlimited family of real estate trusts, which also includes:
- Dream Industrial REIT (DIR.UN.TO)
- Dream Global REIT (DRG.UN.TO)
Dream Office REIT and Dream Global REIT share a Chief Executive Officer, P. Jane Gavan. Dream Industrial REIT has a separate Chief Executive named Brent Chapman.
Dream Office REIT trades on the Toronto Stock Exchange under the ticker D.UN and is listed in U.S.-based stock databases under the ticker D.UN.TO or sometimes DRETF.
Dream Office REIT’s Strategic Plan
At the beginning of 2016, Dream Office REIT announced a Strategic Plan that was expected to transform its business and return the trust to fundamental business growth.
The Plan’s announcement came at an opportune time, as the trust’s stock had languished for some time. The Strategic Plan’s announcement saw a noticeable stock price increase from below $16 to ~$20, circled in the diagram below.
