Here we take a look at two of those TSX REITs that are inexpensive and provide investors with exceptional dividends.
A dividend paying REIT with a 10.4% yield
The first stock in this list is FPI Slate Office (TSX: SOT.UN). Shares of Slate Office have fallen 34.5% year-to-date, which means its dividend yield stands at 10.4%.
The REIT has built a portfolio of office buildings with a diverse footprint. However, due to the ongoing pandemic, offices have been closed which has impacted the turnover of most commercial REITs. On the flip side, institutional investors and publicly traded companies continue to seek office towers in larger cities. This is a significant opportunity for Slate Office, which owns and manages office buildings in the city center and suburbs.
With the dreaded virus under control and offices reopened, Slate Office’s stock should grow and recover lost ground. Occupancy and rents in commercial markets are less volatile, which should also benefit Slate Office in the long run.
The company recently released its second quarter results and said it “received 96% to 97% of rent in cash each month in the second quarter and expects to collect substantial residual rent through deferral programs. short term”.
Its operating funds stood at $ 11.8 million, down 3.3% year-over-year, while its payout ratio was 61.9%. We can see that the company’s dividend is secure and the stock is trading at a multiple of the book price of just 0.43, making it a worthwhile buy for value and contrarian investors.
Analysts who follow Slate Office REIT have a 12-month average target price of $ 4.82, which is 26% higher than the current price. After taking into account its dividend yield, the annual returns will be approximately 36%.
A commercial real estate game
FPI RioCan (TSX: REI.UN) is the second largest retail real estate company in Canada. The company derives a stable flow of cash flow from rentals and distributes it to shareholders in the form of dividends. RioCan REIT stock lost 44% in 2020, indicating a forward yield of 9.6%.
It owns a portfolio of 220 properties across Canada with a net leasable area of 38.6 million square feet. Although the company focuses on retail, its customer base is diverse with an occupancy rate of 96.4%, which gives it a stable income and a defensive gap.
Despite the ongoing pandemic, RioCan collected 73% of its rent owed in Q2, the most difficult quarter in history. It also reported a net loss of $ 350.8 million, compared to a net profit of $ 253 million.
RioCan shares are also trading at a cheap multiple with a price to book ratio of 0.61. Analysts following the stock have a 12-month average target price of $ 21, which indicates a 40% increase. After factoring in its dividend yield, investors could earn almost 50% next year.
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Fool contributor Aditya Raghunath has no position in any of the stocks mentioned.