Q: Peter, could I get your updated opinion on Aliied property reit. I dont believe they have ever cut the dividend and some folks on BNN are calling it a strong buy. The div. is certainly attractive. I am looking for income not particularly growth, Thanks Ken
5i Research Answer:
AP.UN has not cut its distribution in the past. Its 9% yield does imply some investor concern, however. It is a relatively small REIT, in a sector (office) that continues to struggle. Debt is high. Payout ratio is 87%. The units have recovered nicely from their low, and lower interest rates can help both its fundamentals and its sentiment/valuation. But there is essentially zero growth here. Cash flow per unit is the same as it was eight to ten years ago. Units are one-third of the value they were four years ago. While the units could continue to rise (slowly) with the sector, we would not view it as a safe, secure income stock overall. We would prefer a lower yield from a much larger REIT, rather than take size/sector risk here.