CT Real Estate Investment Trust (TSE:CRT.UN) is a Canadian REIT that leases out properties and collects rent mainly from Canadian Tire Corporation (TSE:CTC.A), hence the name CT (Canadian Tire) REIT. To give an idea of how much of the company’s business is focused on Canadian Tire, its top 10 tenants that aren’t related to Canadian Tire made up just 3.82% of annualized rent as of Q3. The stock also yields about 5.6%, making it an attractive choice for dividend investors when considering its fundamentals.
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It’s likely that almost everyone who lives in Canada has seen a Canadian Tire location before since it’s one of the country’s most iconic retailers, selling home goods, sporting equipment, apparel, footwear, automotive parts, and more. Canadian Tire is also a trustworthy, profitable company, which gives peace of mind to CRT.UN investors.
What Makes CT REIT a Good Company?
Other than having most of its rent coming from a high-quality investment grade (BBB-rated) tenant, CT REIT has a few things going for it. For example, it’s grown its book value per unit from about C$11.00 in 2014 to approximately C$16.20 as of Q3. During that same period, its adjusted funds from operations (AFFO, a cash-flow metric used by REITs) per unit grew from C$0.736 to C$1.139, growing each year consistently. Dividends have grown consistently, too, which we mentioned in the section below.
CRT.UN also has a 3.7x interest coverage ratio, meaning it can pay its annual interest payments 3.7x over using its annual operating income. Additionally, the company boasts a 99.3% occupancy rate and has a weighted average lease term of 8.5 years. However, the downside is that the company can only escalate its rents by 1.5% each year, which may not keep up with inflation in the long term.
CT REIT’s Dividend is Solid
As mentioned above, CRT.UN units currently yield about 5.6%. However, that alone isn’t enough info to determine whether it’s a worthy dividend stock, so let’s dig deeper. Its AFFO payout ratio hovers at around 75%, meaning that 75% of its AFFO gets paid out to unitholders — a pretty safe payout ratio for a REIT, giving it room to raise its dividend further.
In fact, its dividend per unit has been increasing each year since 2013 and has grown by about 4% annually for the past five years. This may not sound exciting, and it isn’t, but it’s a higher growth rate than many high-yielding Canadian REITs, and it’s coming from a nice 5.6% starting yield.
Is CT REIT Stock a Buy, According to Analysts?
According to analysts, CRT.UN stock comes in as a Moderate Buy based on three Buys and three Holds assigned in the past three months. The average CRT.UN stock price target of C$17.17 implies 11.3% upside potential.
The Takeaway: A Solid REIT to Consider
CRT.UN looks like a good REIT that offers a generous dividend. While its growth rate isn’t high enough to excite us (relative to the dividend yield), the stock can still provide investors with solid returns when combined with the growing book value per unit each year, which grew at a 4.7% annual rate from 2016 to 2021. Lastly, the stock has tangible upside potential when considering that its book value per unit is near C$16.20 while its current share price is C$15.43.
However, if you’re looking for a high dividend yield with better growth prospects, you can also check out Canadian Tire stock itself, as it currently yields 4.9% while growing its dividend much faster.
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